QUANTUM X LABS INC. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS AND RESULTS OF OPERATIONS Special Note Regarding Forward-Looking Statements The following management’s discussion and analysis section should be read in conjunction with the Company’s unaudited financial statements as of September 30, 2024 and 2023, and the related statements of statement operation, statement of changes in shareholders’ equity and statements of cash flows for the nine and three months then ended, and the related notes thereto contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”). Our reporting currency and functional currency is the U.S. dollar. Unless otherwise expressly stated or the context otherwise requires, references in this prospectus to “NIS” are to New Israeli Shekels, and references to “dollars” or “$” mean U.S. dollars. On July 10, 2024, our board of directors approved to effect a one-for-four consolidation of our share capital, pursuant to which holders of our shares of common stock will receive one share of common stock for every four shares of common stock held. The reverse split is not yet in effect, and will be effectuated upon approval by FINRA. Unless the context expressly indicates otherwise, all references to share and per share amounts referred to herein reflect the amounts before giving effect to the reverse split. Forward-Looking Statements This management discussion and analysis section contains forward-looking statements, such as statements of the Company’s plans, objectives, expectations, and intentions. Any statements that are not statements of historical fact are forward-looking statements. When used, the words “believe,” “plan,” “intend,” “anticipate,” “target,” “estimate,” “expect” and the like, and/or future tense or conditional constructions “will,” “may,” “could,” “should,” etc., or similar expressions, identify certain of these forward-looking statements. These forward-looking statements are subject to risks and uncertainties that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. Forward-looking statements are based on information we have when those statements are made or our management’s good faith belief as of that time with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to: ● the continued demand of digital advertising as an integral part of corporate marketing and internal communications plans and the continued growth and acceptance of digital advertising as effective alternatives to traditional offline marketing products and service; ● our ability to retain and attract a programmatic advertiser, and the associated payments received from such programmatic advertisers’ ads on websites which have been categorized as “Made for Advertising”; ● our ability to generate enough cash flow to meet our debt obligations or fund our other liquidity needs, and substantial doubt regarding our ability to continue as a going concern; ● our need to raise additional capital to meet our business requirements in the future and such capital raising may be costly or difficult to obtain and could dilute out shareholders’ ownership interests; ● our common stock may not be approved for listing on the Nasdaq Stock Market LLC (“Nasdaq”) or another recognized national exchange and many potential investors may be unwilling to purchase our common stock; ● our ability to receive credit facility or utilize existing credit facilities, to fund our operations, at favorable terms, or at all; ● our ability to pay our obligations when they become due, including our loan and facility agreements and Financing Agreement (as defined below); ● our subsidiaries’ future performance, including our ability to instill potential measures to assist Cortex and Gix Media in mitigating future economic harm; ● entry of new competitors and products, the impact of large and established internet and technology companies and potential technological obsolescence of our offered platforms; and ● political, economic and military conditions in Israel, including the attack by Hamas and the military hostilities with Hezbollah and Iran and other terrorist organizations from the Gaza Strip and elsewhere in the region and Israel’s war against them, as well as the war’s potential impact on our business and operation. The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with which may cause our actual results to differ from those anticipated in our forward-looking statements. For a discussion of these and other risks that relate to our business and investing in our common stock, you should carefully review the risks and uncertainties described in this Quarterly Report on Form 10-Q, and those contained in section captioned “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (the “SEC”) on March 25, 2024 (the “Annual Report”). The Company’s actual results could differ materially from those contemplated in these forward-looking statements as a result of these factors. The Company does not undertake any obligation to update forward-looking statements to reflect events or circumstances occurring after the date of this Quarterly Report. - 34 - Overview and Background Viewbix Inc. (the “Registrant”, “Viewbix” or the “Company”) is a digital advertising platform that develops and markets a variety of technological platforms that automate, optimize and monetize digital online campaigns. Viewbix’s operations were previously focused on analysis of the video marketing performance of its clients as well as the effectiveness of their messaging (“Video Advertising Platform”). With the Video Advertising Platform, Viewbix allowed its clients with digital video properties the ability to use its platforms in a way that allows viewers to engage and interact with the video. The Video Advertising Platform measures when a viewer performs a specific action while watching a video and collects and reports the results to the client. However, due to the Company’s failure to meet predetermined sales targets which were set pursuant to the Recapitalization Transaction (as defined in note 1.A to the interim condensed consolidated financial statements). with Gix Internet Ltd., in January 2020, the Company determined to reduce its operations and the size of its sales and R&D team in Video Advertising Platform. The Company, through its subsidiaries Gix Media Ltd. (“Gix Media”) and Cortex Media Group Ltd. (“Cortex”), expanded its digital advertising operations across two main sectors: ad search and digital content (the “Search Platform” and the “Content Platform”, respectively”). Gix Media and Cortex develop and market a variety of technological software solutions that automate, optimize and monetize online campaigns. Cortex also creates, edits and markets content in various languages to different target audiences in order to generate revenues from advertisements displayed together with the content, which are posted on digital content, marketing and advertising platforms. These technological tools enable advertisers and website owners to earn more from their advertising campaigns and generate additional profits from their sites. Through its Search Platform, the Company provides services to leading search engines worldwide (“Search Engines”) by developing, marketing and distributing software products to internet users. The operations and activity on this platform are powered by Gix Media. Through the Content Platform, the Company provides editing and marketing services of content in different languages and to different target audiences with the goal of generating revenues from advertising employed in such content, which is based on digital content marketing and advertising platforms. The operations and activity on this platform are powered by Cortex. Search Platform Gix Media’s Search Platform allows for the referral of user traffic (i.e., searches that are performed by internet users) to the Search Engines, such as Yahoo and Bing, where the Search Engines display the ads of their customers. The Search Engines pay Gix Media for the searches that were referred by it, based on the amount of consideration that the Search Engine receives from the advertisers for the user traffic generated, less a certain percentage from the revenues attributed to the Search Engine. Since the customers of Gix Media are the Search Engines, and not the advertisers, Gix Media recognizes revenues for the actual amount received from the Search Engines, and not from the advertisement revenue itself. The referral of user traffic by Gix Media to the Search Engines is possible after users download Gix Media’s products, which are browser add-ons, usually from the browser stores (mostly Google Chrome browsers) and by downloading desktop software products, free of charge, for the Apple operating system (for Mac computers) and for the Microsoft operating system (for PC computers). When downloading Gix Media’s products, the users grant permission to Gix Media to refer the searches performed while using Gix Media’s products to the Search Engines. In addition, Gix Media provides user traffic referral services to Search Engines through the referral of traffic of browsers who engage content generated by Gix Media. This content is displayed on ad spaces that are purchased by the Company by content recommendation companies (such as Yahoo!, Outbrain, Taboola and Gemini). When occasional users click on such content, Gix Media transfers user traffic to a Search Engine which contains search words that are related to the advertising content. - 35 - Content Platform Cortex’s Content Platform produces engaging content and marketing material in various languages to various target audiences, in order to generate revenues from advertisements displayed together with the content, which are posted on digital content, marketing and advertising platforms. Cortex acts as a digital content platform that publishes content written by creative writers and editors which it employs. The content is displayed on several different content websites owned by Cortex, covering various subjects including culture, history, trips, pets, entertainment and leisure, food, etc. (the “Cortex Websites”). Cortex developed capabilities that enable it and its customers to profit from the original content which it publishes by advertising the content on leading international third-party websites and online ad platforms (the “Third Party Platforms”). Readers are exposed to the articles on the Third-Party Platforms and may choose to read them by clicking an ad, after which readers are directed automatically to the Cortex Websites where the content is posted. The technological tools developed by Cortex allow businesses in the digital advertising market (Search Engines, ad exchanges, advertisers, content owners and brand owners) to earn more from their advertising campaigns and generate additional profit from their websites, both from its content and from its advertising. Advertisers display ads on various platforms for potential customers (internet users and readers). In order to help maximize the effectiveness of advertising, Cortex developed different advertising systems and tools for content management, content distribution and campaigns and measurement of performance on the various platforms that display the content. Recent Developments Credit Facilities of the Company 2023 Loan Agreement On November 15, 2023, Viewbix Ltd., the Company’s subsidiary (“Viewbix Israel”) entered into a Loan Agreement (the “2023 Loan”) with certain lenders (the “2023 Loan Lenders”) whereby the Lenders provided Viewbix Israel with loans in the aggregate amount of $480,000 (which sum may be increased to up to $1,000,000, at the discretion of the 2023 Loan Lenders). In accordance with the terms of the 2023 Loan, the principal amount bears an annual interest at a rate of 9% and shall be repaid over the course of two years following January 1, 2024. In the event that Viewbix Israel fails to repay a part or all of the loan amount (including the accrued interest) and subject to certain conditions, the outstanding loan amount may be converted, at each 2023 Loan Lender’s discretion, into shares of the Company’s Common Stock, at a price per share equal to the 30-day average of the closing bid price of the Common Stock, calculated as of such date the respective portion of the outstanding loan amount becomes repayable. In connection with the 2023 Loan, the Company issued to each 2023 Loan Lender a warrant to purchase shares of Common Stock (the “2023 Warrants”), such that the number of shares of Common Stock underlying each 2023 Warrant will reflect (one-for-one) the number of dollars provided by each Lender as part of the principal amount. Each 2023 Warrant has an exercise price per share of Common Stock of $0.50 and will expire and cease to be exercisable on December 31, 2025. The 2023 Warrants were issued to the Lenders pursuant to Regulation S of the Securities Act of 1933, as amended (“Regulation S”). June 2024 Facility Agreement On July 22, 2024, we entered into an amended and restated facility agreement (the “June 2024 Facility Agreement”) for a $1 million (the “June 2024 Facility Loan Amount”) credit facility (the “June 2024 Credit Facility”) with the 2023 Loan Lenders and certain lenders set forth therein (the “June 2024 Lenders”) that amends and restates the prior facility agreement entered into on June 18, 2024 between the Company and the June 2024 Lenders (the “Prior June 2024 Facility Agreement”). In addition to the June 2024 Facility Loan Amount, the June 2024 Facility Agreement contemplates the inclusion of an additional $530,657 of outstanding debt owed by us to the June 2024 Lenders (the “June 2024 Prior Loan Amount”, and together with the June 2024 Facility Loan Amount, the “June 2024 Loan Amount”), which June 2024 Prior Loan Amount is entitled to certain rights under the June 2024 Credit Facility. - 36 - The term (the “June 2024 Facility Term”) of the June 2024 Credit Facility expires 12 months following the date of the June 2024 Facility Agreement (the “Initial Maturity Date”), provided that, if the effectiveness of an uplisting of our shares of common stock to a Nasdaq securities exchange (the “Uplist”) occurs prior to the Initial Maturity Date, the June 2024 Facility Term shall expire 12 months following the effective date of the Uplist. The June 2024 Facility Agreement sets forth a drawdown schedule as follows: (i) an aggregate of $350,000 was drawn down on the date of the Prior June 2024 Facility Agreement, (ii) an aggregate of $150,000 was drawn down upon the filing of the Registration Statement (as defined below) and (iii) an aggregate of $500,000 drawn down upon the effectiveness of the Uplist. The June 2024 Credit Facility accrues interest at a rate of 12% per annum, and we will also pay such interest on the June 2024 Prior Loan Amount, which is equal to $183,679 (the “June 2024 Facility Interest”). The June 2024 Facility Interest was paid in advance for the first year of the June 2024 Facility in (i) shares of our common stock at a conversion rate of $0.25 for each U.S. dollar of June 2024 Facility Interest accrued on the respective June 2024 Loan Amount, equal to an aggregate of 734,716 shares of common stock (the “June 2024 Facility Shares”) and (b) a warrant to purchase a number of shares of common stock equal to the June 2024 Facility Shares (the “June 2024 Facility Warrant”). Immediately following the effectiveness of the Uplist, (i) $662,957 of the June 2024 Loan Amount will convert into shares of common stock at a conversion rate equal to $0.25 per share of our common stock (the “June 2024 Convertible Stock”) and (ii) we will issue a warrant in substantially the same form and on substantially the same terms as a June 2024 Facility Warrant to purchase a number of shares of our common stock equal to the June 2024 Convertible Stock with an exercise price of $0.25 per share (the “June 2024 Conversion Warrant”, and (i) and (ii), collectively a “June 2024 Conversion Unit”). Such portion of the June 2024 Loan Amount that is not converted into a June 2024 Conversion Unit will remain outstanding and will not convert following the Uplist. For the duration of the June 2024 Facility Term of the June 2024 Credit Facility, the June 2024 Lenders may elect to convert such unconverted portion of the June 2024 Loan Amount into additional June 2024 Conversion Units or, upon the expiration of the June 2024 Facility Term, such unconverted portion of the June 2024 Loan Amount will be repaid in accordance with the terms of the June 2024 Facility Agreement. The June 2024 Facility Warrants are exercisable upon issuance at an exercise price of $0.25 per share of common stock, subject to certain beneficial ownership limitations and price adjustments set forth therein, and will have a three-year term from the issuance date. In addition and in connection with the June 2024 Credit Facility, we agreed to pay L.I.A. Pure Capital Ltd. (the “June 2024 Lead Lender”) a commission consisting of (i) 200,000 shares of common stock, (ii) a warrant in substantially the same form and on substantially the same terms as the June 2024 Facility Warrant to purchase 200,000 shares of common stock with an exercise price of $0.25 per share (the “June 2024 Lead Lender Warrant”) and (iii) a warrant to purchase 2,500,000 shares of common stock with an exercise price of $1.00 per share, representing an aggregate exercise amount of $2.5 million, subject to beneficial ownership limitations and adjustments (the “June 2024 Lead Lender Fee Warrant” and together with the June 2024 Lead Lender Warrant and the June 2024 Facility Warrants, the “June 2024 Warrants”). The June 2024 Lead Lender Fee Warrants were immediately exercisable upon issuance and have a three-year term from the issuance date. Following the closing of the Private Placement (as defined below), the exercise price of the June 2024 Lead Lender Fee Warrant was adjusted to $0.118, which is the effective price per share of common stock in the Private Placement, or the June 2024 Lead Lender Fee Warrant Adjusted Exercise Price, and the number of shares of common stock issuable upon the exercise of the June 2024 Lead Lender Fee Warrant was also adjusted to a total 21,186,440 shares, or the June 2024 Lead Lender Fee Warrant Adjusted Shares, such that the product of the June 2024 Lead Lender Fee Warrant Adjusted Exercise Price and the June 2024 Lead Lender Fee Warrant Adjusted Shares is equal to an aggregate exercise amount of $2.5 million. The June 2024 Lead Lender Fee Warrant was recognized at fair value and as of September 30, 2024, was classified as additional paid-in capital on the Company’s condensed consolidated balance sheets (see also note 6.E to our interim condensed consolidated financial statements ended September 30,2024) - 37 - We undertook to file a registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) to register, inter alia, the resale by the June 2024 Lenders of shares of common stock underlying the June 2024 Credit Facility, the June 2024 Warrants and the June 2024 Conversion Units, which we filed on July 31, 2024. On September 13, 2024, we submitted an application to uplist to the Nasdaq. The timing of the uplisting process depends on a variety of factors, including, but not limited to, overall market conditions. No assurance can be given that our application will be approved or that a trading market will develop. Private Placement On July 3, 2024, we entered into a definitive securities purchase agreement (the “Purchase Agreement”) with a global investment firm (the “Lead Investor”) for the purchase and sale in a private placement (the “Private Placement”) of units (the “Units”) consisting of (i) 1,027,500 shares of our common stock (the “PIPE Shares”) and (ii) common stock purchase warrants (the “PIPE Warrants”) to purchase up to 1,541,250 shares of our common stock (the “PIPE Warrant Shares”) to the Lead Investor and other investors (collectively, the “Investors”) acceptable to the Lead Investor and us. The Private Placement closed on July 3, 2024. The purchase price per Unit was $0.25. The PIPE Warrants are exercisable upon issuance at an exercise price of $0.25 per share, subject to certain adjustments and certain anti-dilution protection set forth therein, and will have a three-year term from the issuance date. In addition, the PIPE Warrants are subject to an automatic exercise provision in the event that our shares of common stock are approved for listing on the Nasdaq Capital Market. The aggregate gross proceeds to us from the Private Placement were $256,875. In connection with the Private Placement, we entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investors. Pursuant to the Registration Rights Agreement, we are required to file a resale registration statement (the “PIPE Registration Statement”) with the SEC to register for resale of the PIPE Shares issued in the Private Placement and the PIPE Warrant Shares issuable upon exercise of the PIPE Warrants, within 30 days of the date of the Purchase Agreement, and to have such PIPE Registration Statement declared effective within 30 days following the filing date of the PIPE Registration Statement in the event the PIPE Registration Statement is not reviewed by the SEC, or 60 days following the filing date of the PIPE Registration Statement in the event the PIPE Registration Statement is reviewed by the SEC. We will be obligated to pay certain liquidated damages if we fail to file the PIPE Registration Statement when required, fail to cause the PIPE Registration Statement to be declared effective by the SEC when required, or if we fail to maintain the effectiveness of the PIPE Registration Statement. We filed the PIPE Registration Statement on July 31, 2024. The Purchase Agreement and the Registration Rights Agreement also contain representations, warranties, indemnification and other provisions customary for transactions of this nature. In addition, pursuant to the Purchase Agreement, we agreed to abide by certain customary standstill restrictions for a period of 30 days following the effective date of the PIPE Registration Statement. In addition, while the PIPE Warrants are outstanding, the Investors shall not, and shall cause its affiliates to not enter into or effect, directly or indirectly, hedging transactions that establish a net short position. Upon the closing of the Private Placement, we reimbursed the Lead Investor $10,000 for actual and documented fees and expenses incurred. In addition, we paid a commission to the Lead Investor of (i) a cash fee of $12,844 and (ii) 51,375 shares of our common stock. First July 2024 Facility Agreement On July 22, 2024, we entered into an amended and restated facility agreement, as amended on July 25, 2024 (as amended, the “First July 2024 Facility Agreement”) for a $2.5 million (the “First July 2024 Facility Loan Amount”) credit facility (the “First July 2024 Credit Facility”) with a certain lender (the “First July 2024 Lender”) that amends and restates the prior facility agreement entered into on July 4, 2024 between the Company and the July 2024 Lender (the “Prior First July 2024 Facility Agreement”). - 38 - The First July 2024 Facility Loan Amount will remain available until the earliest to occur of (a)(i) its drawing down in full, (ii) the 36-month anniversary of the First July 2024 Facility Agreement and (b) upon such date that the Company completes a $2.0 million financing transaction (the “First July 2024 Facility Term”). In the event the First July 2024 Facility Term lapses, the First July 2024 Facility Loan Amount shall be repaid to the First July 2024 Lender immediately thereafter. The First July 2024 Facility Agreement sets forth a drawdown schedule as follows: (i) an aggregate of $50,000 was drawn down on the effective date of the Prior First July 2024 Facility Agreement, (ii) an aggregate of $50,000 shall be drawn down upon the effectiveness of the Uplist, and (iii) following the Uplist, an aggregate of $200,000 shall be drawn down on a quarterly basis until the First July 2024 Facility Loan Amount is exhausted. The First July 2024 Credit Facility will accrue interest at a rate of 12% per annum (the “First July 2024 Facility Interest”). The First July 2024 Facility Interest was paid in advance for the first year of the First July 2024 Facility in (i) 1,200,000 shares of our common stock at a conversion rate of $0.25 for each U.S. dollar of First July 2024 Facility Interest accrued on the respective First July 2024 Facility Loan Amount, and (ii) 1,200,000 warrants to purchase a number of shares of our common stock at a conversion rate of $0.25 for each U.S. dollar of First July 2024 Facility Interest accrued on the respective First July 2024 Facility Loan Amount (the “First July 2024 Facility Warrants”). The First July 2024 Facility Warrants are exercisable upon issuance at an exercise price of $0.25 per share of common stock, subject to certain beneficial ownership limitations and price adjustments set forth therein, and will have a three-year term from the issuance date. Immediately following the effectiveness of the Uplist, (i) $100,000 of the First July 2024 Facility Loan Amount will convert in shares of common stock at a conversion rate of $0.25 per share (such amount of shares converted, the “First July 2024 Convertible Stock”), and, (ii) we will issue a warrant to purchase such amount of First July 2024 Convertible Stock, with an exercise price of $0.25 per share (the “First July 2024 Conversion Warrant”, and together with the First July 2024 Convertible Stock, a “First July 2024 Conversion Unit”, and collectively the “First Uplist Conversion”). The remaining First July 2024 Facility Loan Amount outstanding and not converted following the First Uplist Conversion shall remain available for the duration of the First July 2024 Facility Term, whereby, upon the lapse of the First July 2024 Facility Term, such amount shall be repaid to such First July 2024 Lender. In addition and in connection with the First July 2024 Credit Facility, we agreed to pay the First July 2024 Lender a one-time fee consisting of: (i) 500,000 shares of our common stock, representing five percent (5%) of the First July 2024 Facility Loan Amount at a conversion rate of $0.25 and (ii) a warrant to purchase 1,000,000 shares of our common stock with an exercise price of $0.25 per share (the “First July 2024 Facility Fee Warrant” and together with the First July 2024 Facility Warrants, the “First July 2024 Warrants). We undertook to file a registration statement with the SEC to register, inter alia, the resale by the First July 2024 Lender of shares of common stock underlying the First July 2024 Credit Facility, the First July 2024 Warrants and the First July 2024 Conversion Units, which we filed on July 31, 2024. Second July 2024 Facility Agreement On July 28, 2024, we entered into a facility agreement (the “Second July 2024 Facility Agreement”) for a $3.0 million (the “Second July 2024 Facility Loan Amount”) credit facility (the “Second July 2024 Credit Facility”) with certain lenders (the “Second July 2024 Lenders”). The Second July 2024 Facility Loan Amount will remain available until the earliest to occur of (a)(i) its drawing down in full, (ii) the 40-month anniversary of the Second July 2024 Facility Agreement and (b) upon such date that the Company completes a $2.5 million financing transaction (the “Second July 2024 Facility Term”). In the event the Second July 2024 Facility Term lapses, the Second July 2024 Facility Loan Amount shall be repaid to the Second July 2024 Lenders immediately thereafter. - 39 - The Second July 2024 Facility Agreement sets forth a drawdown schedule as follows: (i) an aggregate of $80,000 was drawn down on the effective date of the Second July 2024 Facility Agreement, (ii) an aggregate of $80,000 shall be drawn down upon the effectiveness of the Uplist, and (iii) following the Uplist, an aggregate of $80,000 shall be drawn down on a monthly basis until the Second July 2024 Facility Loan Amount is exhausted. The Second July 2024 Credit Facility will accrue interest at a rate of 12% per annum (the “Second July 2024 Facility Interest”). The Second July 2024 Facility Interest was paid in advance for the first year of the Second July 2024 Facility in (i) 1,440,000 shares of our common stock at a conversion rate of $0.25 for each U.S. dollar of Second July 2024 Facility Interest accrued on the respective Second July 2024 Facility Loan Amount, and (ii) 1,440,000 warrants to purchase a number of shares of our common stock at a conversion rate of $0.25 for each U.S. dollar of Second July 2024 Facility Interest accrued on the respective Second July 2024 Facility Loan Amount (the “Second July 2024 Facility Warrants”). As of the second-year anniversary of the Second July 2024 Credit Facility, the Second July 2024 Facility Interest will be paid by us in cash to the Second July 2024 Lenders. The Second July 2024 Facility Warrants are exercisable upon issuance at an exercise price of $0.25 per share of common stock, subject to certain beneficial ownership limitations and price adjustments set forth therein, and will have a three-year term from the issuance date. Immediately following the effectiveness of the Uplist, (i) $160,000 of the Second July 2024 Facility Loan Amount will convert in shares of common stock at a conversion rate of $0.25 per share (such amount of shares converted, the “Second July 2024 Convertible Stock”), and (ii) we will issue a warrant to purchase such amount of Second July 2024 Convertible Stock, with an exercise price of $0.25 per share (the “Second July 2024 Conversion Warrant”, and together with the Second July 2024 Convertible Stock, a “Second July 2024 Conversion Unit”, and collectively the “Second Uplist Conversion”). The remaining Second July 2024 Facility Loan Amount outstanding and not converted following the Second Uplist Conversion shall remain available for the duration of the Second July 2024 Facility Term, whereby, upon the lapse of the Second July 2024 Facility Term, such amount shall be repaid to such Second July 2024 Lender. In addition and in connection with the Second July 2024 Credit Facility, we agreed to pay the Second July 2024 Lenders a one-time fee consisting of 600,000 shares of our common stock, representing five percent (5%) of the Second July 2024 Facility Loan Amount at a conversion rate of $0.25. We undertook to file a registration statement with the SEC to register, inter alia, the resale by the Second July 2024 Lenders of shares of common stock underlying the Second July 2024 Credit Facility, the Second July 2024 Facility Warrants and the Second July 2024 Conversion Units, which we filed on July 31, 2024. Securities Exchange Agreement On July 31, 2024, we entered into an amended and restated securities exchange agreement, or the Securities Exchange Agreement, with Metagramm Software Ltd., or Metagramm, pursuant to which we agreed to issue to Metagramm 9.99% of our issued and outstanding capital stock on a post-closing basis in exchange for 19.99% of Metagramm’s issued and outstanding share capital on a post-closing basis. The transactions contemplated by the Securities Exchange Agreement are expected to close following the Uplist (as defined above), subject to satisfaction of customary closing conditions. Services Agreements On July 14, 2024 and July 25, 2024, we entered into consulting agreements (the “Consultant Agreements”) with certain consultants (the “Consultants”) pursuant to which the Consultants agreed to provide certain services to us. As partial compensation, we issued 480,000 shares of our common stock (the “Consultant Shares”) to the Consultants. - 40 - Amendment to Certificate of Incorporation On July 15, 2024, the Company filed an Amendment to its Certificate of Incorporation (the “Amendment”) to effect a 1-for-4 reverse stock split of the Company’s common stock, par value $0.0001 per share (the “Common Stock” and the “Reverse Stock Split”). The Amendment became effective upon filing, however the Reverse Stock Split is not yet in effect, and will be effectuated upon approval by FINRA. Upon the effectiveness of the Reverse Stock Split, every four (4) outstanding shares of the Company’s Common Stock will be converted into one (1) share of the Company’s Common Stock. The Reverse Stock Split will not change the par value of the Common Stock or the number of authorized shares of Common Stock, which is 490,000,000 shares of Common Stock. As a result of the Reverse Stock Split and upon its effectiveness, the number of shares of the Company’s Common Stock that may be purchased upon the exercise of outstanding warrants, options, or other securities convertible into, or exercisable or exchangeable for, shares of our Common Stock, and the exercise or conversion prices for these securities, will be ratably adjusted in accordance with their terms. All descriptions of our capital stock, including share amounts and per share amounts in this Quarterly Report, are presented before giving effect to the Reverse Stock Split. Recent Developments Regarding Cortex On October 13, 2021, Gix Media acquired 70% (on a fully diluted basis) of the share capital of Cortex (the “Cortex Acquisition”), an Israeli private company operating in the field of online media and advertising. In consideration for the Cortex Acquisition, Gix Media paid NIS 35 million in cash (approximately $11 million), out of which an amount of $0.5 million was deposited in trust for a period of 12 months from the closing date. The Cortex Acquisition also includes the obligation and right of Gix Media to acquire 30% of Cortex’s share capital in three equal tranches, each at the beginning of 2023, 2024 and 2025 (“Remaining Balance Shares”), such that following the acquisition of all of the Remaining Balance Shares, Gix Media will hold 100% of Cortex’s share capital on a fully diluted basis. On January 23, 2023, Gix Media purchased an additional 10% of Cortex’s share capital. In January 2024, Gix Media did not purchase an additional 10% of Cortex’s share capital, as Cortex did not meet certain Key Performance Indicators (KPIs), as conditioned in the definitive agreements of the Cortex Acquisition. In connection with the acquisition of Cortex on October 13, 2021 (the “Cortex Acquisition”), Gix Media entered into a financing agreement with Bank Leumi Le Israel (“Leumi”), for the provision of a line of credit in the total amount of up to $3.5 million and a long-term loan totaling $6 million, which Gix Media used to finance the Cortex Acquisition (the “Financing Agreement”). On July 25, 2022, Gix Media and Leumi entered into an addendum to the Financing Agreement according to which Leumi will provide Gix Media with a loan of up to $1,500,000 to be withdrawn at the discretion of Gix Media by no later than January 31, 2023 (the “Additional Loan”). The Additional Loan was withdrawn in connection with the purchase of the additional 10% of Cortex’s share capital on January 17, 2023. On October 10, 2023, Gix Media and Leumi entered into a second addendum to the Financing Agreement (the “Second Addendum”), according to which, effective as of September 26, 2023, certain provisions, including among others, the conditions of the financial covenants contained therein and the interest rate quote, were amended according to the agreed terms between the parties. In April 2024, the Company was informed by Cortex, that certain recent developments relating to publishers that are categorized by a number of programmatic advertisers as “Made for Advertising” (“MFA”) sites, including decisions made by leading media programmatic advertisers to prioritize different media categories and implement publishing restrictions in connection with MFA, have materially affected Cortex’s business and operations. In connection with the foregoing, a significant customer of Cortex notified Cortex that in light of the foregoing changes relating to MFA that customer decided to stop advertising on Cortex’s Websites, which decision significantly and negatively impacted Cortex’s future revenue streams (the “Cortex Adverse Effect”). Upon receipt of this update, the Company’s board of directors convened a meeting to discuss the implications on the Company as well as potential measures to assist Cortex in mitigating any future economic harm to Cortex and the Company, including (inter alia), assisting with reducing operating expenses, helping identify new revenues sources for Cortex, participating in any negotiations with Cortex’s and Gix Media’s bank regarding the terms of its outstanding loans and business plans in an effort to provide additional liquidity and ensure continued compliance with Cortex’s and Gix Media’s obligations towards the bank, and assisting with fundraising prospects in debt or equity capital in order to help enable Cortex’s and Gix Media’s continued business and operations. On July 13 2024, Gix Media and Leumi entered into a third addendum to the Financing Agreement according to which, inter alia, effective as of May 15, 2024 and until August 31, 2024: (i) the Company is obligated to transfer to Gix Media $600,000; (ii) a new covenant, measured by reference to positive EBTIDA was implemented; (iii) all payments due to the long-term bank loan from Leumi were deferred to August 31, 2024 and from September 1, 2024, payments will be repaid as schedule until the end of the long-term bank loan; (iv) a new $350,000 loan was granted to Gix Media on June 13, 2024, to be repaid until August 30, 2024, alongside the existing credit facility to Gix Media, which remains equal to 80% of Gix Media’s customer balance and (v) Gix Media is obligated to perform a reduction in expenses, including reduction in force. Effective as of August 30, 2024, Gix Media and Leumi entered into a fourth addendum to the Financing Agreement, pursuant to which, inter alia: (i) subject to the receipt of at least $2,000,000 from the Company by no later than January 1, 2025, the existing credit facility to Gix Media shall be extended until February 27, 2025 and (ii) the repayment of the outstanding principal amounts of the long-term bank loans of Gix Media under Financing Agreement and an additional loan in the amount of $160,000, will be deferred until December 31, 2024 and from January 1, 2025, all due payments will be repaid as schedule until the end of the term of the long term bank loans (see also note 6.B to our interim condensed consolidated financial statements ended September 30, 2024). - 41 - Reincorporation in Nevada On September 27, 2023, our stockholders approved to grant to the board of directors the power to effect a reincorporation of the Company from the State of Delaware to the State of Nevada by way of a parent-subsidiary merger (the “Reincorporation”). The Reincorporation will be effected pursuant to an Agreement and Plan of Merger to be entered between the Company and Viewbix Inc., a soon to be formed wholly-owned subsidiary under the laws of the State of Nevada (the “Surviving Corporation”), which will provide that the Company, as parent in this transaction, will merge with and into the Surviving Corporation. Upon the consummation of the Reincorporation, the Company will cease its legal existence as a Delaware corporation, and the Surviving Corporation will continue the Company’s business as the surviving corporation under the name “Viewbix Inc.” succeeding to all of the Company’s rights, assets, liabilities and obligations, except that its affairs will cease to be governed by the Delaware General Corporation Law and will be subject to the Nevada Revised Statutes. In addition, as approved by our stockholders, upon completion of the Reincorporation, the Company will adopt an Articles of Incorporation and new bylaws under the Nevada Revised Statues, which will replace its current Certificate of Incorporation and Bylaws. As of the date of this Quarterly Report, our Board of Directors has not effected the Reincorporation. The Reincorporation remains subject to obtaining approval of a tax ruling from the Israeli Tax Authority and the approval of FINRA. We anticipate that the Reincorporation will take effect in the first quarter of 2025. Corporate Information We were incorporated in the State of Delaware on August 16, 1985, under a predecessor name, The InFerGene Company (“InFerGene Company”). On August 25, 1995, a wholly owned subsidiary of InFerGene Company merged with Zaxis International, Inc., an Ohio corporation, which following such merger, the surviving entity, InFerGene Company, changed its name to Zaxis International, Inc. Our principal executive offices are located at: 3 Hanehoshet St, Building B, 7th floor, Tel Aviv, Israel and our telephone number is +972-73-391-2900. Our website address is www.viewbix.com . The information contained on, or that can be accessed through, our websites is not incorporated by reference into this prospectus and is intended for informational purposes only. Results of Operations Results of Operations During the Three Months Ended September 30, 2024 as Compared to the Three Months Ended September 30, 2023 Our revenues were $6,281 thousand for the three months ended September 30, 2024, compared to $15,715 thousand during the same period in the prior year. - 42 - Our revenues from the Content Platform (excluding inter-segment revenues) were $5,492 thousand for the three months ended September 30, 2024, a decrease of $4,582 as compared to 10,074 thousand during the same period in the prior year. The reason for the decrease during the three months ended September 30, 2024, is due to the Cortex Adverse Effect. Our revenues from Gix Media’s Search Platform were $789 thousand for the three months ended September 30, 2024, a decrease of $4,852 as compared to $5,641 thousand during the same period in the prior year. The reasons for the decrease during the three months ended September 30, 2024, is due to: (1) decrease in the amount of search referrals conducted by users, provided by Gix Media to Search Engines, caused primarily by changes and updates to internet browsers’ technology, which have caused a decrease in revenues from the direct model, and (2) a decrease in the number of searches received from Gix Media’s third-party strategic partners in the indirect model mainly as a result of decrease in the credit lines received from third-party strategic partners. Our traffic-acquisition and related costs were $5,145 thousand for the three months ended September 30, 2024, a decrease of $9,381 compared to $14,526 thousand during the same period in the prior year. The reason for the decrease in the three months ended September 30, 2024, is due to the decrease in revenues from both the Content and Search Platforms during the three months ended September 30, 2024, as mentioned above. Our research and development expenses were $338 thousand for the three months ended September 30, 2024, as compared to $700 thousand during the same period in the prior year. The reason for the decrease in the three months ended September 30, 2024, is due to the expense reduction in both the Content and Search Platforms during the three months ended September 30, 2024, as compared to the same period in the prior year. Our selling and marketing expenses decreased to $329 thousand for the three months ended September 30, 2024, as compared to $680 thousand during the same period in the prior year. The reason for the decrease in the three months ended September 30, 2024, is due to the expense reduction primarily in salaries in the Content Platforms during the three months ended September 30, 2024, as compared to the same period in the prior year. Our general and administrative expenses were $435 thousand for the three months ended September 30, 2024, as compared to $727 thousand during the same period in the prior year. The reason for the decrease in the three months ended September 30, 2024, is due to the expense reduction primarily in salaries, rental and headquarters expenses in the three months ended September 30, 2024, as compared to the same period in the prior year. Our depreciation and amortization expenses for the three months ended September 30, 2024, were $727 thousand as compared to $734 thousand during the same period in the prior year. Our other expenses for the three months ended September 30, 2024, were $213 compared to $0 during the three months ended September 30, 2023. The increase in our other expenses during the three months ended September 30, 2024, is mainly due to professional expenses incurred in connection with the Company’s planned Uplist. Our net financial income was $152 thousand for the three months ended September 30, 2024, compared to $260 thousand net financial expenses during the same period in the prior year. The reason for the decrease in our net financial expenses and an increase in our financial income during the three months ended September 30, 2024, is mainly due to financing income recorded due to accounting treatment of financial instruments, created and recorded as part of the Company’s credit facilities. - 43 - Our income tax benefit was $59 thousand for the three months ended September 30, 2024, as compared to a $131 thousand tax benefit during the same period in the prior year. The reason for the decrease during the three months ended September 30, 2024, is due to the fact that during the three months ended September 30, 2023, the Company recorded a loss before tax on income from the Content Platform, which retroactively decreased the income tax expenses recorded for the previous quarters. Results of Operations During the Nine Months Ended September 30, 2024 as Compared to the Nine Months Ended September 30, 2023 Our revenues were $ 23,616 thousand for the nine months ended September 30, 2024, compared to $ 63,731 thousand during the same period in the prior year. Our revenues from Cortex’s Content Platform (excluding inter-segment revenues) were $19,240 thousand for the nine months ended September 30, 2024, a decrease of $27,898 as compared to $47,138 thousand during the same period in the prior year. The reason for the decrease during the nine months ended September 30, 2024, is due to the Cortex Adverse Effect. Our revenues from Gix Media’s Search Platform were $4,376 thousand for the nine months ended September 30, 2024, a decrease of $12,217 thousand as compared to $16,593 thousand during the same period in the prior year. The reasons for the decrease during the nine months ended September 30, 2024, is due to: (1) decrease in the amount of search referrals conducted by users, provided by Gix Media to Search Engines, caused primarily by changes and updates to internet browsers’ technology, which have caused a decrease in revenues from the direct model, and (2) a decrease in the number of searches received from Gix Media’s third-party strategic partners in the indirect model mainly as a result of decrease in the credit lines received from third-party strategic partners. Our traffic-acquisition and related costs were $19,214 thousand for the nine months ended September 30, 2024, a decrease of $37,343 compared to $56,557 thousand during the same period in the prior year. The reason for the decrease in the nine months ended September 30, 2024, is due to the decrease in revenues from both the Content and Search Platforms during the three months ended September 30, 2024, as mentioned above. Our research and development expenses were $1,600 thousand for the nine months ended September 30, 2024, compared to $ 2,213 thousand during the same period in the prior year. The reason for the decrease in the nine months ended September 30, 2024, is due to the reduction of expenses in the Search and Content Platform, primarily in salaries and technological services. Our selling and marketing expenses were $1,440 thousand for the nine months ended September 30, 2024, which is a decrease of $678 thousand as compared to $2,118 thousand during the same period in the prior year. The reason for the decrease in the nine months ended September 30, 2024, is due to the expense reduction primarily in salaries in the Content and Search Platforms during the nine months ended September 30, 2024, as compared to the same period in the prior year. Our general and administrative expenses were $1,737 thousand for the nine months ended September 30, 2024, compared to $2,119 thousand during the same period in the prior year. The reason for the decrease in the nine months ended September 30, 2024, is due to the Company’s expenses reduction primarily in salaries and professional services during the nine months ended September 30, 2024, as compared to the same period in the prior year. Our depreciation and amortization expenses were $2,282 thousand for the nine months ended September 30, 2024, as compared to $2,202 thousand during the same period in the prior year. A goodwill impairment loss of $4,739 thousand was recorded during the nine months ended September 30, 2024, compared to $0 during the nine months ended September 30, 2023. The total amount of goodwill impairment loss recognized by us, during the nine months ended September 30, 2024, was related to the Content Platform (see also note 5.B to our interim condensed consolidated financial statements ended September 30,2024). - 44 - Our net financial expenses were $2,755 thousand for the nine months ended September 30, 2024, compared to $691 thousand during the same period in the prior year. The reason for the increase during the nine months ended September 30, 2024, is mainly due to financing expenses recorded due to accounting treatment of financial instruments, created and recorded as part of the Company’ credit facilities and private placement. Our income tax benefit was $82 thousand for the nine months ended September 30, 2024, as compared to $40 thousand income tax expenses during the same period in the prior year. The reason for the change during the nine months ended September 30, 2024, is due to the decrease in income before tax. Liquidity and Capital Resources As of September 30, 2024, we had current assets of $12,894 thousand, consisting of $1,405 thousand in cash and cash equivalents, $42 thousand restricted deposits, $6,091 thousand in accounts receivable, $1,433 thousand in other current assets and $3,923 thousand in a loan to our Parent Company. As of September 30, 2024, we had non-current assets of $17,907 thousand, consisting of $83 thousand in deferred taxes, $36 thousand in property and equipment net, $10,273 thousand in intangible assets net and $7,515 thousand in goodwill. As of September 30, 2024, we had $16,931 thousand in current liabilities consisting of $9,9 70 thousand in accounts payable, $834 thousand in other payables and $5,081 thousand in short term loans and current maturities of long-term loans, $290 thousand in derivative warrant liability and $756 thousand in short-term convertible loans. As of September 30, 2024, we had $2,304 thousand in non-current liabilities consisting of $1,080 thousand long-term loans and $1,224 thousand in deferred taxes. As of December 31, 2023, we had current assets of $17,805 thousand consisting of $1,774 thousand in cash and cash equivalents, $149 thousand in restricted deposits, $11,359 thousand in accounts receivable, $771 thousand in other current assets and $3,752 thousand in the loan to our Parent Company. As of December 31, 2023, we had non-current assets of $25,477 thousand consisting of $147 thousand in deferred taxes, $397 thousand in operating lease right-of-use assets, $245 thousand in property and equipment net, $12,434 thousand in intangible assets net and $12,254 thousand in goodwill. As of December 31, 2023, we had $19,773 thousand in current liabilities consisting of $12,359 thousand in accounts payable, $889 thousand in other payables, $6,440 thousand in short term loans and current maturities of a long-term loans and $85 thousand in operating lease liabilities. As of December 31, 2023, we had $4,885 thousand in non-current liabilities consisting of $3,064 thousand long-term loans, $304 thousand in operating lease liabilities - long term and $1,517 thousand in deferred taxes. We had a negative working capital of $4,037 thousand compared to a negative working capital of $1,968 thousand as of September 30, 2024, and December 31, 2023, respectively. During the three months ended September 30, 2024, we had a positive cash flow from operating activities of $534 thousand, which was the result of $695 thousand in net loss, $332 thousand from positive adjustments to operating activities, and $897 thousands from positive changes in assets and liabilities items. - 45 - During the nine months ended September 30, 2024, we had positive cash flow from operating activities of $1,990 thousand, which was the result of $10,069 thousand in net loss, $9,093 thousand from positive adjustments to operating activities, and $2,966 thousands from positive changes in assets and liabilities items. There are no limitations in the Company’s Amended and Restated Certificate of Incorporation on the Company’s ability to borrow funds or raise funds through the issuance of shares of its common stock to affect a business combination. Gix Media has provided several liens under the Financing Agreement with Leumi in connection with the Cortex Transaction, including: (1) a floating lien on Gix Media’s assets; (2) a lien on Gix Media’s bank account in Leumi; (3) a lien on Gix Media’s rights under the Cortex Transaction; (4) a fixed lien on Gix Media’s intellectual property; and (5) a lien on all of Gix Media’s holdings in Cortex. As of September 30, 2024, the Company has also provided several liens under Financing Agreement with Leumi in connection with the Cortex Acquisition, as follows: (1) a guarantee to Leumi of all of Gix Media’s obligations and undertakings to Leumi, unlimited in amount; (2) a subordination letter on behalf of the Company to Leumi; (3) a first ranking asset charge over all of the assets of the Company; and (4) a Deposit Account Control Agreement over the Company’s bank accounts. According to the Financing Agreement, Gix Media undertook to meet financial covenant of positive EBITDA over the life of the loans. As of September 30, 2024, Gix Media is in compliance with the financial covenant in connection with the Financing Agreement. Going Concern The Company experienced a decrease in its revenues from the digital content and search segments, as a result of the Cortex Adverse Effect, a decrease in user traffic acquired from third party advertising platforms, an industry-wide decrease in advertising budget, changes and updates to internet browsers’ technology, which adversely impacted the Company’s ability to acquire traffic in the search segment and a decrease in revenues from routing of traffic acquired from third-party strategic partners in the search segment, as a result of lack of availability of suppliers credit from such third party strategic partners. As a result of the foregoing, the Company’s operations were adversely affected. The decline in revenues and other circumstances described above raise substantial doubts about the Company’s ability to continue as a going concern during the 12-month period following the issuance date of this Quarterly Report. Management’s response to these conditions included reduction of salaries and related expenses and reduction of professional services in the research and development, selling and marketing functions, reduction of other operational expenses, such as lease costs and overheads, as well as creation of new partnerships and other new income sources. In addition, the Company entered into facility agreements and a private placement agreement, through which it has raised capital. Additionally, the Company plans to effect the Uplist and submitted an application to the Nasdaq, after which, if the Uplist is successful, in accordance with the terms of the aforesaid private placement and facility agreements, the Company is expected to receive additional funds. Furthermore, the Company’s subsidiaries entered into an addendum to the loan agreement with Leumi pursuant to which loans repayments were deferred while short term credit lines with Leumi continued to be utilized. However, there is significant uncertainty as to whether the Company will further succeed in implementing its plans or be able to secure additional funds when needed. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required for smaller reporting companies. - 46 -