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

- Company: [Quantum X Labs Inc.](/companies/qxl.md) (CIK 797542)
- Form: 10-Q
- Filed: 2023-11-14
- Accepted by EDGAR: Nov 14, 2023, 16:05 ET
- Period: 2023-09-30
- Accession: 0001493152-23-041065
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/797542/000149315223041065/form10-q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/797542/000149315223041065/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $15.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $63.7m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $700.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $2.2m | us-gaap:ResearchAndDevelopmentExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$1.7m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$1.5m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | −$131.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $40.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$1.5m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$2.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.14 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.10 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$0.14 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$0.10 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 14,847,913 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 14,920,585 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-07-01 to 2023-09-30 | −$276.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | $739.0k | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-07-01 to 2023-09-30 | $3.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $13.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $2.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $18.8m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $50.1m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $20.6m | us-gaap:LiabilitiesCurrent |
| Long-term debt | at 2023-09-30 | $2.7m | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2023-09-30 | $1.9m | us-gaap:LongTermDebtCurrent |
| Short-term borrowings | at 2023-09-30 | $6.0m | us-gaap:ShortTermBorrowings |
| Shareholders' equity | at 2023-09-30 | $20.1m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 30,731 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 September 30, 2023 and 2022, 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”).*

#### 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, 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 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;
- 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 recent attack by Hamas 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 operations.

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 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 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.

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 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.

#### 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

#### 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. 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 (see notes 6 and 10 of our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q).

### 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 September 30, 2023 as Compared to the Three Months Ended September 30, 2022

Our revenues were $15,715 thousand for the three months ended September 30, 2023, compared to $22,778 thousand during the same period in the prior year.

Our revenues from Cortex’s Content Platform were $10,074 thousand for the three months ended September 30, 2023, a decrease of $7,002 as compared to $17,076 thousand during the same period in the prior year. The reason for the decrease during the three months ended September 30, 2023 is due to a decrease of user traffic acquisition from the Third-Party Platforms, primarily resulting from technological changes and content policy changes on such Third-Party Platforms, causing a lower amount of users to reach the Cortex Websites and thus decreasing the exposures to the ads displayed on the Cortex Websites. In response to the technological and policy changes, Cortex updated and adjusted its platform to adapt to these changes, partially restoring the amount of user traffic acquisition, which mitigated the scope of the decrease.

Our revenues from Gix Media’s Search Platform were $5,641 thousand for the three months ended September 30, 2023, a slight decrease as compared to $5,702 thousand during the same period in the prior year.

Our traffic-acquisition and related costs were $14,526 thousand for the three months ended September 30, 2023, a decrease of $5,121 compared to $19,647 thousand during the same period in the prior year. The reason for the decrease in the three months ended September 30, 2023, is due to the decrease in user traffic acquisition from the main online ad platforms.

Our research and development expenses were $700 thousand for the three months ended September 30, 2023, compared to $804 thousand during the same period in the prior year. The reason for the decrease in the three months ended September 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 $680 thousand for the three months ended September 30, 2023, a slight increase compared to $628 thousand during the same period in the prior year.

Our general and administrative expenses increased to $727 thousand for the three months ended September 30, 2023, as compared to $450 thousand during the same period in the prior year. The reason for the increase in the three months ended September 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 September 30, 2023, there was an increase in professional services and consultant costs following the Reorganization Transaction, as compared to the three months ended September 30, 2022.

Our depreciation and amortization expenses for the three months ended September 30, 2023, were $734 thousand as compared to $736 thousand during the same period in the prior year.

Our other expenses for the three months ended September 30, 2023 were $0 thousand, compared to $86 thousand during the three months ended September 30, 2022. The decrease in our other expenses during the three months ended September 30, 2023 is due to expenses incurred during the three months ended September 30, 2022, in connection with the Reorganization Transaction which was consummated on September 19, 2022.

Our net financial expenses were $260 thousand for the three months ended September 30, 2023, a slight decrease as compared to $301 thousand net financial expenses during the same period in the prior year.

Our income tax benefit was $131 thousand for the three months ended September 30, 2023, as compared to a $55 thousand tax expense during the same period in the prior year. The reason for the decrease in income tax expenses during the three months ended September 30, 2023, 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, 2023 as Compared to the Nine Months Ended September 30, 2023

Our revenues were $63,731 thousand for the nine months ended September 30, 2023, compared to $66,115 thousand during the same period in the prior year.

Our revenues from Cortex’s Content Platform were $47,138 thousand for the nine months ended September 30, 2023, a slight decrease as compared to $48,515 thousand during the same period in the prior year.

Our revenues from Gix Media’s Search Platform were $16,593 thousand for the nine months ended September 30, 2023, a decrease of $1,007 as compared to $17,600 thousand during the same period in the prior year. The reasons for the decrease during the nine months ended September 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 nine months ended September 30, 2023, by engaging with new strategic partners, which in turn mitigated the scope of the decrease.

Our traffic-acquisition and related costs were $56,557 thousand for the nine months ended September 30, 2023, a slight decrease compared to $56,912 thousand during the same period in the prior year.

Our research and development expenses were $2,213 thousand for the nine months ended September 30, 2023, compared to $2,445 thousand during the same period in the prior year. The reason for the decrease in the nine months ended September 30, 2023, is the reduction of expenses in the Search Platform, primarily in salaries and technological services.

Our selling and marketing expenses were $2,118 thousand for the nine months ended September 30, 2023, which is an increase of $265 thousand compared to $1,853 thousand during the same period in the prior year. The increase of selling and marketing expenses during the nine months ended September 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 $2,119 thousand for the nine months ended September 30, 2023, an increase of $793 as compared to $1,326 thousand during the same period in the prior year. The reason for the increase in the nine months ended September 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 nine months ended September 30, 2023, there was an increase in professional services and consultant costs following the Reorganization Transaction, as compared to the nine months ended September 30, 2022.

Our depreciation and amortization expenses increased to $2,202 thousand for the nine months ended September 30, 2023, a slight increase compared to $2,051 thousand during the same period in the prior year.

Our other expenses were $0 thousand for the nine months ended September 30, 2023, compared to $121 thousand during the nine months ended September 30, 2022. The decrease in our other expenses during the nine months ended September 30, 2023 is due to expenses incurred during the nine months ended September 30, 2022, in connection with the Reorganization Transaction which was consummated on September 19, 2022.

Our net financial expenses were $691 thousand for the nine months ended September 30, 2023, compared to $1,374 thousand during the same period in the prior year. The reason for the decrease during the nine months ended September 30, 2023, is mainly due to the decrease in financial expenses relating to the USD to NIS exchange rate, as compared to the nine months ended September 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 nine months ended September 30, 2023.

Our income tax expenses were $40 thousand for the nine months ended September 30, 2023, a slight decrease as compared to $63 thousand during the same period in the prior year.

#### Liquidity and Capital Resources

As of September 30, 2023, we had current assets of $18,752 thousand, consisting of $2,550 thousand in cash and cash equivalents, $184 thousand restricted deposits, $11,493 thousand in accounts receivable, $807 thousand in other current assets and $3,718 thousand in a loan to our Parent Company.

As of September 30, 2023, we had non-current assets of $31,398 thousand, consisting of $192 thousand in deferred taxes, $419 thousand in operating lease right-of-use asset, $257 thousand in property and equipment net, $13,169 thousand in intangible assets net and $17,361 thousand in goodwill.

As of September 30, 2023, we had $20,605 thousand in current liabilities consisting of $11,742 thousand in accounts payable, $904 thousand in other payables, $7,879 thousand in short term loans and current maturities of long-term loans and $80 thousand in operating lease liabilities – short term.

As of September 30, 2023, we had $4,515 thousand in non-current liabilities consisting of $2,663 thousand long-term loans, $306 thousand in operating lease liabilities - long term and $1,546 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 $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 and $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 $1,853 thousand compared to a positive working capital of $1,319 thousand as of September 30, 2023 and December 31, 2022, respectively.

During the three months ended September 30, 2023, we had a negative cash flow from operating activities of $276 thousand, which was the result of $1,781 thousand in net loss, $682 thousand from positive adjustments to operating activities, and $823 thousands from positive changes in assets and liabilities items.

During the nine months ended September 30, 2023, we had positive cash flow from operating activities of $739 thousand, which was the result of $2,209 thousand in net loss, $2,084 thousand from positive adjustments to operating activities, and $864 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, 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 Gix Media’s consolidated financial statements in all 4 preceding consecutive quarters (in any given period during the life of the loan), will not exceed 2.4 in the first two years following the execution of the Financing Agreement, which according to the Second Addendum was extended by nine months to June 30, 2024 and thereafter, will not exceed 1.75. As of September 30, 2023, Gix Media is in compliance with the financial covenants in connection with the Financing Agreement.

#### Going Concern

As a result of the decrease in user traffic during the three month period ending September 30, 2023, and the impact of the ongoing ‘Iron Swords’ war in Israel, which commenced subsequent to September 30, 2023, the Company’s operations were adversely affected. While management expects the Company to continue to generate positive cash flows from its operations, such a decline may reasonably result in the Company’s inability to repay its debt obligations during the 12 month period following the issuance date of the financial statements appearing elsewhere in this Quarterly Report. These prevailing conditions raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in light of these uncertainties include negotiating the terms of its debt instrument with Bank Leumi or issuing additional equity or debt instruments in order to raise capital. However, there can be no assurance that such financing alternatives will consummate or will be available on terms acceptable to the Company.

## Controls and procedures

As filed, 3,278 characters.

#### Evaluation of Disclosure Controls and Procedures

As of September 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 September 30, 2023.

The Company’s disclosure controls and procedures were determined to be not effective as of the end of September 30, 2023, as the assets of the acquired businesses, Gix Media and Cortex, which constitute substantially all of the Company’s assets as of September 30, 2023 and as of December 31, 2022, were excluded from management’s assessment of internal control over financial reporting as of December 31, 2022, as Gix Media and Cortex were determined, in accordance with the SEC staff guidance, to be an acquired business for financial reporting purposes as of December 31, 2022, following completion of the Reorganization Transaction on September 19, 2022.

While the Company’s management continues to implement a compliance project, 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 September 30, 2023, as these controls have not operated and performed for a sufficient period of time to demonstrate that the Company’s disclosure controls and procedures are effective and as the Company has not completed the implementation of certain information technology controls underlying the financial information of Gix Media and Cortex.

#### Changes in Internal Control Over Financial Reporting

Other than as described above, 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 September 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 September 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 have strengthened our internal control over financial reporting, we are required to have these controls operate and perform for a sufficient period, as well as to enhance certain information technology controls, 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.

## Risk factors

As filed, 6,378 characters.

Our business faces many risks, a number of which are described under the caption “Risk Factors” in our Annual Report. Other than as set forth below, there have been no material changes from the risk factors previously disclosed in our Annual Report. The risks described in our Annual Report and below may not be the only risks we face. Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results. If any of the events or circumstances described in the risk factors contained in our Annual Report or described below occurs, our business, financial condition or results of operations could be adversely impacted and the value of an investment in our securities could decline. Investors and prospective investors should consider the risks described in our Annual Report and below, and the information contained under the caption “Forward-Looking Statements” and elsewhere in this Quarterly Report on Form 10-Q before deciding whether to invest in our securities.

***Political, economic and military conditions in Israel, including the recent attack by Hamas and other terrorist organizations from the Gaza Strip and Israel’s war against them, may impede our ability to operate and harm our financial results.***

Because all of our operations are conducted in Israel and all members of our board of directors and management as well as all of our employees and consultants, including employees of our service providers, are located in Israel, our business and operations are directly affected by economic, political, geopolitical and military conditions in Israel. Since the establishment of the State of Israel in 1948, a number of armed conflicts have occurred between Israel and its neighboring countries and terrorist organizations active in the region. These conflicts have involved missile strikes, hostile infiltrations and terrorism against civilian targets in various parts of Israel, which have negatively affected business conditions in Israel.

In October 2023, Hamas terrorists infiltrated Israel’s southern border from the Gaza Strip and conducted a series of attacks on civilian and military targets. Hamas also launched extensive rocket attacks on Israeli population and industrial centers located along Israel’s border with the Gaza Strip and in other areas within the State of Israel. These attacks resulted in extensive deaths, injuries and kidnapping of civilians and soldiers. Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel to their continued rocket and terror attacks. In the weeks since the initial attack by Hamas, hostilities along Israel’s northern border with Hezbollah located in Lebanon have accelerated, and this clash may escalate in the future into a greater regional conflict.

The intensity and duration of Israel’s current war against Hamas is difficult to predict, as are such war’s economic implications on the Company’s business and operations and on Israel’s economy in general. These events may be intertwined with wider macroeconomic indications of a deterioration of Israel’s economic standing, which may have a material adverse effect on the Company and its ability to effectively conduct its operations.

In connection with the Israeli security cabinet’s declaration of war against Hamas and possible hostilities with other organizations, several hundred thousand Israeli military reservists were drafted to perform immediate military service. Certain of our employees and consultants in Israel, including the Chief Executive Officer of Gix Media, in addition to employees of our service providers located in Israel, have been called, and additional employees may be called, for service in the current or future wars or other armed conflicts with Hamas, and such persons may be absent for an extended period of time. As a result, our operations may be disrupted by such absences, which disruption may materially and adversely affect our business, prospects, financial condition and results of operations.

Our commercial insurance does not cover losses that may occur as a result of events associated with war and terrorism. Although the Israeli government currently covers the reinstatement value of direct damages that are caused by terrorist attacks or acts of war, we cannot assure you that this government coverage will be maintained or that it will sufficiently cover our potential damages. Any losses or damages incurred by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm our results of operations.

Further, in the past, the State of Israel and Israeli companies have been subjected to economic boycotts. Several countries still restrict business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on our operating results, financial condition or the expansion of our business. A campaign of boycotts, divestment and sanctions has been undertaken against Israel, which could also adversely impact our business.

Prior to the Hamas attack in October 2023, the Israeli government pursued extensive changes to Israel’s judicial system. In response to the foregoing developments, individuals, organizations and institutions, both within and outside of Israel, have voiced concerns that the proposed changes may negatively impact the business environment in Israel including due to reluctance of foreign investors to invest or transact business in Israel as well as to increased currency fluctuations, downgrades in credit rating, increased interest rates, increased volatility in security markets, and other changes in macroeconomic conditions. The risk of such negative developments has increased in light of the recent Hamas attacks and the war against Hamas declared by Israel, regardless of the proposed changes to the judicial system and the related debate. To the extent that any of these negative developments do occur, they may have an adverse effect on our business, our results of operations and our ability to raise additional funds, if deemed necessary by our management and Board of Directors.

Filed Nov 14, 2023.
Source: SEC EDGAR, the filing index for accession 0001493152-23-041065. Last ingested by Listed: Oct 24, 2026, 14:57 ET. No prices; not investment advice.