# Quantum X Labs Inc.: Form 10-Q for the period ended Jun 30, 2023

- Company: [Quantum X Labs Inc.](/companies/qxl.md) (CIK 797542)
- Form: 10-Q
- Filed: 2023-08-14
- Accepted by EDGAR: Aug 14, 2023, 16:10 ET
- Period: 2023-06-30
- Accession: 0001493152-23-028454
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/797542/000149315223028454/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/797542/000149315223028454/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-06-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-04-01 to 2023-06-30 | $27.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 6 months, 2023-01-01 to 2023-06-30 | $48.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-04-01 to 2023-06-30 | $717.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 6 months, 2023-01-01 to 2023-06-30 | $1.5m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-04-01 to 2023-06-30 | $250.0k | us-gaap:OperatingIncomeLoss |
| Operating income | 6 months, 2023-01-01 to 2023-06-30 | $174.0k | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-04-01 to 2023-06-30 | $87.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 6 months, 2023-01-01 to 2023-06-30 | $171.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-04-01 to 2023-06-30 | −$124.0k | us-gaap:NetIncomeLoss |
| Net income | 6 months, 2023-01-01 to 2023-06-30 | −$521.0k | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.04 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-04-01 to 2023-06-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 6 months, 2023-01-01 to 2023-06-30 | −$0.04 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-04-01 to 2023-06-30 | 15,071,640 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 6 months, 2023-01-01 to 2023-06-30 | 15,098,354 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-04-01 to 2023-06-30 | $1.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 6 months, 2023-01-01 to 2023-06-30 | $1.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-04-01 to 2023-06-30 | $8.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 6 months, 2023-01-01 to 2023-06-30 | $10.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-06-30 | $3.3m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-06-30 | $26.3m | us-gaap:AssetsCurrent |
| Total assets | at 2023-06-30 | $58.5m | us-gaap:Assets |
| Current liabilities | at 2023-06-30 | $26.6m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-06-30 | $3.1m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-06-30 | $1.9m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2023-06-30 | $6.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-06-30 | $21.6m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 26,010 characters.

### 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 June 30, 2023 and 2022, and the related statements of statement operation, statement of changes in shareholders’ equity and statements of cash flows for the six and three months then ended, and the related notes thereto contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”).*

#### 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 generate enough cash flow to meet our debt obligations or fund our other liquidity needs;
- 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 ability to adequately protect our intellectual property;
- our ability to successfully integrate the business of Gix Media Ltd. (“Gix Media”), our wholly owned subsidiary, and Cortex Media Group Ltd. (“Cortex”), our majority owned subsidiary;
- our subsidiaries’ future performance; and
- entry of new competitors and products, the impact of large and established internet and technology companies and potential technological obsolescence of our offered platforms.

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, 2022, filed with the Securities and Exchange Commission (the “SEC”) on March 24, 2023 (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.

### 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 below), in January 2020, the Company determined to reduce its operations and the size of its sales and R&D team in the Digital Advertising Platform.

The Company, through its subsidiaries Gix Media and Cortex, expanded its digital advertising operations across two additional 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.

### Recent Developments

#### Reorganization Transaction with Gix Media Ltd.

On December 5, 2021, the Company entered into a certain Agreement and Plan of Merger (the “Reorganization Transaction”) with Gix Media., an Israeli company and the majority-owned subsidiary of Gix Internet, in the field of MarTech (Marketing Technology) solutions, primarily search and content monetization and Vmedia Merger Sub Ltd., an Israeli company and wholly-owned subsidiary of the Company (“Merger Sub”), pursuant to which, following the Reorganization Transaction, and upon satisfaction of additional closing conditions, Merger Sub will merge with and into Gix Media, with Gix Media being the surviving entity and wholly-owned subsidiary of the Company. Prior to the closing of the Reorganization Transaction, Gix Media was a majority-owned subsidiary of Gix Internet, which held approximately 58% of the common stock of the Company, par value $0.0001 per share (“Common Stock”), on a fully diluted basis.

On September 19, 2022, the Reorganization Transaction, was consummated (the “Closing”) and, as a result, all outstanding ordinary shares of Gix Media, having no par value (the “Gix Media Shares”) were exchanged for shares of the Company’s Common Stock such that Gix Media became a wholly owned subsidiary of the Company. Following the Reorganization Transaction, holders of the Gix Media Shares held 90% of the Company’s Common Stock on a fully diluted basis, with Gix Internet holding 76.67% of the Common Stock on a fully diluted basis.

The following diagram illustrates the associated corporate structure of the Company prior to and following the Reorganization Transaction.

Following the closing of the Reorganization Transaction, the Company began to integrate Gix Media’s technology into its operations aiming to expand its growth potential in the search and content monetization space. Gix Media’s business operations include both (i) the provision of services to the world’s leading search engines through the development, marketing and distribution of free software to many Internet users, and (ii) editing and marketing of content in different languages to different target markets, for the purpose of monetizing advertisements on digital marketing and advertising platforms.

In connection with the Closing, effective as of August 31, 2022, the Company adopted an Amended and Restated Certificate of Incorporation (“Certificate of Incorporation”), pursuant to which the Company, among other things, effected a reverse stock split of its Common Stock at a ratio of 1-for-28 (the “Reverse Split”) and an Amended and Restated Bylaws (“Bylaws”). All descriptions of our capital stock, including share amounts and per share amounts in this Quarterly Report, are presented after giving effect to the Reverse Split.

#### Acquisition of Cortex Media Group Ltd.

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 connection with the Cortex Acquisition, on October 13, 2021, Gix Media entered into a financing agreement with Bank Leumi Le Israel Ltd (“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.

### 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 11 Derech Menachem Begin Street, Ramat Gan, Israel, 5268104 and our telephone number is +972 9-774-1505. Our website address is *www.viewbix.com.*

#### Results of Operations

### Results of Operations During the Three Months Ended June 30, 2023 as Compared to the Three Months Ended June 30, 2022

Our revenues were $27,154 thousand for the three months ended June 30, 2023, compared to $22,902 thousand during the same period in the prior year.

Our revenues from Cortex’s Content Platform were $21,312 thousand for the three months ended June 30, 2023, an increase of $4,272 as compared to $17,040 thousand during the same period in the prior year. The reasons for the increase during the three months ended June 30, 2023 are due to: (1) operational growth of the advertising platforms used by Cortex for its reader traffic acquisition process; (2) an increase in the amount of readers exposed to Cortex’s digital content websites (the “Cortex Websites”) as result of the increase in the content displayed on the Cortex Websites; and (3) the successful increase of digital content published in Spanish, and launch of digital content published in new languages such as Portuguese and German.

Our revenues from Gix Media’s Search Platform were $5,842 thousand for the three months ended June 30, 2023, a slight decrease as compared to $5,862 thousand during the same period in the prior year.

Our traffic-acquisition and related costs were $24,050 thousand for the three months ended June 30, 2023, an increase of $4,400 compared to $19,650 thousand during the same period in the prior year. The reason for the increase in the three months ended June 30, 2023, is due to the increase in the Content Platform’s revenues.

Our research and development expenses were $717 thousand for the three months ended June 30, 2023, as compared to $793 thousand during the same period in the prior year. The reason for the decrease in the three months ended June 30, 2023, is due to the reduction of expenses in the Search Platform, primarily in salaries and technological services.

Our selling and marketing expenses increased to $715 thousand for the three months ended June 30, 2023, as compared to $605 thousand during the same period in the prior year. The reason for the increase in the three months ended June 30, 2023, is due to the increase of selling and marketing expenses incurred in connection with the increase in the content displayed on the Cortex Websites and an increase primarily in salaries in the Search Platform.

Our general and administrative expenses increased to $688 thousand for the three months ended June 30, 2023, as compared to $329 thousand during the same period in the prior year. The reason for the increase in the three months ended June 30, 2023, is due to the increase in salary and related costs following the Reorganization Transaction with Gix Media on September 19, 2022, which led to the expansion of the Company’s management team, which included, among other things, the appointment of a chairman in June 2022 and a full-time chief financial officer in July 2022. In addition, during the three months ended June 30, 2023, there was an increase in professional services and consultant costs following the Reorganization Transaction, as compared to the three months ended June 30, 2022.

Our depreciation and amortization expenses for the three months ended June 30, 2023, were $734 thousand as compared to $729 thousand during the same period in the prior year.

Our other expenses for the three months ended June 30, 2023 were $0 thousand, compared to $35 thousand during the three months ended June 30, 2022. The decrease in our other expenses during to the three months ended June 30, 2023 is due to expenses incurred during the three months ended June 30, 2022, in connection with the Reorganization Transaction which was consummated on September 19, 2022.

Our net financial expenses were $246 thousand for the three months ended June 30, 2023, compared to $736 thousand net financial expenses during the same period in the prior year. The reason for the decrease during the three months ended June 30, 2023, is mainly due to the decrease in the financial expenses relating to the USD to NIS exchange rate, as compared to the three months ended June 30, 2022, which was partially offset by the increase in interest expenses related to the Company’s bank loans due to increases in the market’s interest rates during the three months ended June 30, 2023.

Our income tax expenses were $87 thousand for the three months ended June 30, 2023, as compared to a $23 thousand tax benefit during the same period in the prior year. The reason for the increase during the three months ended June 30, 2023, is due to the fact that during the three months ended June 30, 2022, Gix Media recorded a tax benefit from previous years.

### Results of Operations During the Six Months Ended June 30, 2023 as Compared to the Six Months Ended June 30, 2023

Our revenues were $48,016 thousand for the six months ended June 30, 2023, compared to $43,337 thousand during the same period in the prior year.

Our revenues from Cortex’s Content Platform were $37,064 thousand for the six months ended June 30, 2023, an increase of $5,625 as compared to $31,439 thousand during the same period in the prior year. The reasons for the increase during the six months ended June 30, 2023 are due to: (1) operational growth of the advertising platforms used by Cortex for its reader traffic acquisition process; (2) an increase in the amount of readers exposed to the Cortex Websites as result of the increase in the content displayed on the Cortex Websites; and (3) the successful increase of digital content published in Spanish, and launch of digital content published in new languages such as Portuguese and German.

Our revenues from Gix Media’s Search Platform were $10,952 thousand for the six months ended June 30, 2023, a decrease of $946 as compared to $11,898 thousand during the same period in the prior year. The reasons for the decrease during the six months ended June 30, 2023, are due to the decrease in the amount of search referrals conducted by users, provided by Gix Media to search engines, caused primarily by a decrease in the number of searches received from Gix Media’s third party strategic partners, including a significant strategic partner of Gix Media. In response to this decrease, Gix Media expanded its user traffic resources during the six months ended June 30, 2023, by engaging with new strategic partners, which in turn mitigated the scope of the decrease.

Our traffic-acquisition and related costs were $42,031 thousand for the six months ended June 30, 2023, an increase of $4,766 compared to $37,265 thousand during the same period in the prior year. The reason for the increase in the six months ended June 30, 2023, is due to the increase in the Content Platform’s revenues.

Our research and development expenses were $1,513 thousand for the six months ended June 30, 2023, compared to $1,641 thousand during the same period in the prior year. The reason for the decrease in the three months ended June 30, 2023, is due to the reduction of expenses in the Search Platform, primarily in salaries and technological services.

Our selling and marketing expenses were $1,438 thousand for the six months ended June 30, 2023, which is an increase of $213 thousand as compared to $1,225 thousand during the same period in the prior year. The increase of selling and marketing expenses during the six months ended June 30, 2023, is due to expenses incurred in connection with the increase in the content displayed on the Cortex Websites and an increase primarily in salaries in the Search Platform.

Our general and administrative expenses were $1,392 thousand for the six months ended June 30, 2023, an increase of $516 as compared to $876 thousand during the same period in the prior year. The reason for the increase in the six months ended June 30, 2023, is due to the increase in salary and related costs following the Reorganization Transaction with Gix Media on September 19, 2022, which led to the expansion of the Company’s management team, which included, among other things, the appointment of a chairman of the board in June 2022 and a full-time chief financial officer in July 2022. In addition, during the six months ended June 30, 2023, there was an increase in professional services and consultant costs following the Reorganization Transaction, as compared to the six months ended June 30, 2022.

Our depreciation and amortization expenses increased to $1,468 thousand for the six months ended June 30, 2023, as compared to $1,315 thousand during the same period in the prior year. The reason for the increase in the six months ended June 30, 2023, is due to reflection of the historical cost and depreciation expenses of all intangible assets as reflected in the consolidated financial statements of Medigus Ltd., due to the Reorganization Transaction on September 19, 2022. As the Company and Gix Media were consolidated both by Gix Internet and Medigus Ltd., the ultimate parent, before and after the Reorganization Transaction, the Reorganization Transaction was accounted for as a transaction between entities under common control (see Note 1b of our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q).

Our other expenses were $0 thousand for the six months ended June 30, 2023, compared to $35 thousand during the six months ended June 30, 2022. The decrease in our other expenses during the six months ended June 30, 2023 is due to expenses incurred during the six months ended June 30, 2023, in connection with the Reorganization Transaction which was consummated on September 19, 2022.

Our net financial expenses were $431 thousand for the six months ended June 30, 2023, compared to $1,073 thousand during the same period in the prior year. The reason for the decrease during the six months ended June 30, 2023, is mainly due to the decrease in financial expenses relating to the USD to NIS exchange rate, as compared to the six months ended June 30, 2022, which was partially offset by the increase in interest expenses related to the Company’s bank loans due to increases in the market’s interest rates during the six months ended June 30, 2023.

Our income tax expenses were $171 thousand for the six months ended June 30, 2023, as compared to $8 thousand during the same period in the prior year. The reason for the increase during the six months ended June 30, 2023, is due to the fact that during the six months ended June 30, 2022, Gix Media recorded a tax benefit from previous years.

#### Liquidity and Capital Resources

As of June 30, 2023, we had current assets of $26,283 thousand, consisting of $3,304 thousand in cash and cash equivalents, $182 thousand restricted deposits, $18,415 thousand in accounts receivable, $693 thousand in other current assets and $3,689 thousand in a loan to our Parent Company.

As of June 30, 2023, we had non-current assets of $32,171 thousand, consisting of $211 thousand in deferred taxes, $442 thousand in operating lease right-of-use asset, $272 thousand in property and equipment net, $13,885 thousand in intangible assets net and $17,361 thousand in goodwill.

As of June 30, 2023, we had $26,592 thousand in current liabilities consisting of $17,345 thousand in accounts payable, $1,285 thousand in other payables, $7,879 thousand in short term loans and current maturities of long-term loans, $83 thousand in operating lease liabilities – short term.

As of June 30, 2023, we had $5,094 thousand in non-current liabilities consisting of $3,128 thousand long-term loans, $334 thousand in operating lease liabilities - long term and $1,632 thousand in deferred taxes.

As of December 31, 2022, we had current assets of $29,841 thousand consisting of $4,196 thousand in cash and cash equivalents, $185 thousand restricted deposits, $20,945 thousand in accounts receivable, $973 thousand in other current assets and a $3,542 thousand in loan to our Parent Company.

As of December 31, 2022, we had non-current assets of $33,854 thousand consisting of $52 thousand in severance pay funds, $340 thousand in deferred taxes, $486 thousand in operating lease right-of-use asset, $302 thousand in property and equipment net, $15,313 thousand in intangible assets net and $17,361 thousand in goodwill.

As of December 31, 2022, we had $28,522 thousand in current liabilities consisting of $19,782 thousand in accounts payable, $2,084 thousand in other payables, $6,569 thousand in short term loans and current maturities of long-term loan, $87 thousand in operating lease liabilities – short term.

As of December 31, 2022, we had $5,274 thousand in non-current liabilities consisting of $152 thousand in accrued severance pay, $2,881 thousand in long-term loan, $388 thousand in operating lease liabilities - long term and $1,853 thousand in deferred taxes.

We had a negative working capital of $309 thousand compared to positive working capital of $1,319 thousand as of June 30, 2023 and December 31, 2022, respectively.

During the three months ended June 30, 2023, we had a positive cash flow from operating activities of $1,003 thousand, which was the result of $83 thousand in net loss, $723 thousand from positive adjustments to operating activities, and $363 thousands from positive changes in assets and liabilities items.

During the six months ended June 30, 2023, we had positive cash flow from operating activities of $1,015 thousand, which was the result of $428 thousand in net loss, $1,402 thousand from positive adjustments to operating activities, and $41 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 June 30, 2023, 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 covenants over the life of the loans as follows: the ratio of debt to EBITDA, based on the Gix Media’s consolidated financial statements in all 4 consecutive quarters, will not exceed 2.4 in the first two years and will not exceed 1.75 in the following two years. As of June 30, 2023, Gix Media is in compliance with the financial covenants in connection with the Financing Agreement.

## Controls and procedures

As filed, 3,984 characters.

#### Evaluation of Disclosure Controls and Procedures

As of June 30, 2023, the Company’s chief executive officer and chief financial officer, conducted an evaluation (the “Evaluation”) regarding the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Exchange Act). Based upon the Evaluation, as required by Rules 13a-15 or 15d-15, the Company’s chief executive officer and chief financial officer concluded that, and pursuant to the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013), the Company’s disclosure controls and procedures were not effective as of the end of June 30, 2023.

The Company’s disclosure controls and procedures were determined to be not effective as of the end of June 30, 2023, as the assets of the acquired businesses, Gix Media and Cortex, which were excluded from management’s assessment of internal control over financial reporting, constitute substantially all the Company’s assets as of June 30, 2023.

General guidance from the SEC staff provides that if a registrant consummates a material purchase business combination during its fiscal year and it is not possible to conduct an assessment of the acquired business’s internal control over financial reporting during the period between the consummation date and the date of management’s assessment, management may exclude the acquired business from management’s report on internal control over financial reporting.

As previously described in our financial statements for the fiscal year ended December 31, 2022, as the Reorganization Transaction was consummated on September 19, 2022, Gix Media, and its subsidiary Cortex, are each determined to be an acquired business for financial reporting purposes. In accordance with the SEC staff guidance, our management excluded Gix Media and Cortex, which each represent an acquired business, from management’s report on internal control over financial reporting as of June 30, 2023.

The financial statements of each of Gix Media and Cortex reflect total assets constituting approximately 99% of the assets of the Company according to the related consolidated financial statements of the Company as of June 30, 2023. Because the assets of Gix Media and Cortex have been excluded from management’s assessment of internal control over financial reporting, and such assets constitute substantially all of the Company’s assets as of June 30, 2023, the Company’s management concluded that, pursuant to the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (2013), the disclosure controls and procedures were not effective as of the end of June 30, 2023.

#### Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting or in other factors identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during the quarter ended June 30, 2023, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

#### Management’s Remediation Plan

During the quarter ended June 30, 2023, our management continued to implement a compliance project designed to assist the Company with effectively complying with the rules contemplated under the Sarbanes-Oxley Act of 2002. While we believe these measures will strengthen our internal control over financial reporting, we are required to implement and enhance controls underlying the financial information of Gix Media and Cortex as well as have these controls operate and perform for a sufficient period to demonstrate that the Company’s disclosure controls and procedures are effective. We are committed to continuing to improve our internal control processes and will continue to diligently review our financial reporting controls and procedures.

Filed Aug 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001493152-23-028454. Last ingested by Listed: Oct 24, 2026, 14:57 ET. No prices; not investment advice.