Viewbix Inc

NOTE 1: GENERAL

A. Organizational Background

Viewbix Inc. (formerly known as Virtual Crypto Technologies, Inc.) (the “Company”) was 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 (“Zaxis”). In 2015 the Company changed its name to Emerald Medical Applications Corp., subsequent to which the Company, through its subsidiary, was engaged in the development of technology for use in detection of skin cancer. On January 29, 2018, the Company ceased its business operations in this field.

On January 17, 2018, the Company formed a new wholly owned subsidiary under the laws of the State of Israel, Virtual Crypto Technologies Ltd. (“VCT Israel”), to develop and market software and hardware products facilitating and supporting the purchase and/or sale of cryptocurrencies. Effective as of March 7, 2018, the Company’s name was changed from Emerald Medical Applications Corp. to Virtual Crypto Technologies, Inc. VCT Israel ceased its business operation in 2019 and prior to consummation of the Recapitalization Transaction. On January 27, 2020, VCT Israel was sold to a third party for NIS 50 thousand (approximately $13).

On February 7, 2019, the Company entered into a share exchange agreement (the “Share Exchange Agreement” or the “Recapitalization Transaction”) with Gix Internet Ltd., a company organized under the laws of the State of Israel (“Gix” or “Parent Company’’), pursuant to which, Gix assigned, transferred and delivered its 99.83% holdings in Viewbix Ltd., a company organized under the laws of the State of Israel (“Viewbix Israel”), to the Company in exchange for shares of the Company, which resulted in Viewbix Israel becoming a subsidiary of the Company. In connection with the Share Exchange Agreement, effective as of August 7, 2019, the Company’s name was changed from Virtual Crypto Technologies, Inc. to Viewbix Inc.

B. Reorganization Transaction

On December 5, 2021, the Company entered into a certain Agreement and Plan of Merger with Gix Media Ltd. (“Gix Media”), an Israeli company and the majority-owned (77.92%) subsidiary of Gix, the Parent Company and Vmedia Merger Sub Ltd., an Israeli company and wholly-owned subsidiary of the Company (“Merger Sub”), pursuant to which, Merger Sub merged with and into Gix Media, with Gix Media being the surviving entity and a wholly-owned subsidiary of the Company (the “Reorganization Transaction”).

On September 19, 2022, (the “Closing Date”) the Reorganization Transaction was consummated and as a result, all outstanding ordinary shares of Gix Media, having no par value (the “Gix Media Shares”) were delivered to the Company in exchange for the Company’s shares of common stock, par value $0.0001 per share (“Common Stock”). As a result of the Reorganization Transaction, the former holders of Gix Media Shares, who previously held approximately 68% of the Company’s Common Stock, hold approximately 97% of the Company’s Common Stock, and Gix Media became a wholly owned subsidiary of the Company.

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B. Reorganization Transaction (Cont.)

In connection with the Closing of the Reorganization Transaction, the Company filed an Amended and Restated Certificate of Incorporation (the “Amended COI”) with the Secretary of State of Delaware, effective as of August 31, 2022, pursuant to which, concurrently with the effectiveness of the Amended COI, the Company, among other things, effected areverse stock split of its common stock at a ratio of 1-for-28.

As the Company and Gix Media Ltd. were consolidated both by the Parent Company 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. Accordingly, the financial information of the Company and Gix Media Ltd. is presented in these financial statements, for all periods presented, reflecting the historical cost of the Company and Gix Media Ltd., as it is reflected in the consolidated financial statements of the Parent Company, for all periods preceding March 1, 2022, the date the Ultimate Parent obtained a controlling interest in the Parent Company and as it is reflected in the consolidated financial statements of the Ultimate Parent for all periods subsequent to March 1, 2022.

C. Business Overview

The Company and its subsidiaries (the “Group”), Gix Media and Cortex Media Group Ltd. (“Cortex”), operate in the field of digital advertising. The Group has two main activities that are reported as separate operating segments: the search segment and the digital content segment.

The search segment develops a variety of technological software solutions, which perform automation, optimization, and monetization of internet campaigns, for the purposes of obtaining and routing internet user traffic to its customers. The search segment activity is conducted by Gix Media.

The digital content segment is engaged in the creation and editing of content, in different languages, for different target audiences, for the purposes of generating revenues from leading advertising platforms, including Google, Facebook, Yahoo and Apple, by utilizing such content to obtain and route internet user traffic for its customers. The digital content segment activity is conducted by Cortex.

On January 23, 2023, Gix Media acquired an additional 10% of the share capital of Cortex, increasing its holdings to 80% in consideration for $2,625 (the “Subsequent Purchase”). The Subsequent Purchase was financed by Gix Media’s existing cash balances and by a long-term bank loan received on January 17, 2023, in the amount of $1,500 (see also note 6.B).

The Subsequent Purchase was recorded as a transaction with non-controlling interests in the Company’s statement of changes in shareholders equity for the nine months ended September 30, 2023.

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D. Impact of the “Iron Swords” War on Israel

On October 7, 2023, following the brutal attacks on Israel by Hamas, a terrorist organization located in the Gaza Strip that infiltrated Israel’s southern border and conducted a series of attacks on civilian and military targets, Israel’s security cabinet declared war (the “War”). Following the commencement of the War, hostilities also intensified between Israel and Hezbollah, a terrorist organization located in Lebanon. This may escalate in the future into a greater regional conflict. The War led to a reduction of business activities in Israel, evacuation of residences located in the northern and southern borders of Israel, a significant call up of military reserves and lower availability of work force.

As the Group’s customers are mainly in the US and Europe, its operations, revenues, and profitability were indirectly affected due to recruitment of senior employees to military reserves for an extended period of time.

In January 2024, Gix Media and Cortex filed a request with the Israeli Tax Authority (the “ITA”) to receive compensation for the decrease in revenues related to the War. In April and May 2024, Gix Media and Cortex received a total of $337 from the ITA that were recorded as other income in the Company’s consolidated statement of operations for the nine months period ended September 30, 2024.

As of the date of these financial statements the war is still on going. Therefore, there is no assurance that future developments of the War will not have any impact for reasons beyond the Company’s control, such as expansion of the War to additional regions. The Company has business continuity procedures in place, and will continue to follow developments, assessing potential impact, if any, on the Company’s business, financials, and operations.

E. Cortex Adverse Effect

In April 2024, the Company was informed by Cortex that a significant customer of Cortex recently notified Cortex it will stop advertising on Cortex’s sites, as part of its policy decision to cease advertising on Made for Advertising (“MFA”) sites (the “Cortex Adverse Effect”). The Cortex Adverse Effect, which has materially affected Cortex’s business and operations, has occurred following certain recent developments relating to publishers that are categorized by a number of on-line advertisers as MFA, including decisions made by leading media on-line advertisers to prioritize different media categories and implement publishing restrictions in connection with MFA. Due to the Cortex Adverse Effect and additional circumstances as explained in note 5.B, the Company recorded an impairment of $4,739 in the goodwill related to the digital content segment as of June 30, 2024.

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F. Going Concern

During the second half of 2023 and the nine months ended September 30, 2024 the Company experienced a decrease in its revenues from the digital content and search segments, as a result of the Cortex Adverse effect (see note 1.E), 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, during the nine months ended September 30, 2024, the Company recorded an operating loss of $7,396 compared to $1,478 in the nine months ended September 30, 2023. Additionally, the Company recorded a net loss of $10,069 during the nine months ended September 30, 2024, compared to $2,209 in the nine months ended September 30, 2023. As of September 30, 2024, the Company had cash and cash equivalents of $1,405, bank loans of $5,828 and accumulated deficit of $19,427.

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 these financial statements.

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, during the period from June to August 2024, the Company raised through a private placement and through three facility agreements with certain investors and lenders (see note 6) aggregate gross proceeds of $887. Additionally, the Company plans to uplist its shares of common stock to a national securities exchange (the “Uplist”), after which, 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 a loan agreement with Bank Leumi pursuant to which loans repayments were deferred while short term credit lines with Bank Leumi continued to be utilized. However, there is significant uncertainty as to whether the Company will further succeed to implement its plans or be able to secure additional funds when needed.

These financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A. Unaudited Interim Financial Statements

The accompanying unaudited interim condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of U.S. Securities and Exchange Commission Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments considered necessary for a fair presentation have been included (consisting only of normal recurring adjustments except as otherwise discussed). For further information, reference is made to the consolidated financial statements and footnotes thereto included in the Group’s Annual Report on Form 10-K for the year ended December 31, 2023.

B. Principles of Consolidation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

C. Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. The Company evaluates on an ongoing basis its assumptions, including those related to contingencies, deferred taxes, inventory impairment, stock-based compensation, as well as in estimates used in applying the revenue recognition policy. Actual results may differ from those estimates.

D. Derivative Financial Instruments

The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”. Derivative instruments are initially recorded at fair value on the grant date and re-valued at each reporting date, with changes in the fair value reported in the unaudited condensed statements of operations.

E. Fair Value of Financial Instruments

Fair value is defined as the price that would be received for sale of an asset or paid to transfer of a liability, in an orderly transaction between market participants at the measurement date. US GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). These tiers include:

F. Significant Accounting Policies

The significant accounting policies followed in the preparation of these unaudited interim condensed consolidated financial statements are identical to those applied in the preparation of the latest annual financial statements other than the significant accounting policies of derivative financial instruments and fair value of financial instruments (see notes 2.D and 2.E above).

G. Recent Accounting Pronouncements

Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Group’s interim condensed consolidated financial statements.

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NOTE 3: LOAN TO PARENT COMPANY

The balance with the Parent Company represents a balance of an intercompany loan under a loan agreement signed between Gix Media and the Parent Company on March 22, 2020. The loan bears interest at a rate to be determined from time to time in accordance with Section 3(j) of the Income Tax Ordinance, new version, and the Income Tax Regulations (Determination of Interest Rate for the purposes of Section 3(j), 1986) or according to a market interest rate decision as agreed between the parties. The amount of the loan is in U.S. dollars. On March 20, 2024, the Company’s board of directors approved to extend the loan between Gix Media and the Parent Company by 6 months until July 1, 2024. All other terms and conditions of the loan remained unchanged.

For the nine months ended September 30, 2024 and 2023, Gix Media recognized interest income in the amount of $119 and $64, respectively.

NOTE 4: LEASES

On February 25, 2021, Gix Media entered into a lease agreement for a new corporate office of 479 square meters in Ramat Gan, Israel, at a monthly rent fee of $10. The lease period is for 36 months (the “initial lease period”) with an option by the Company to extend the lease period for two additional terms of 24 months each. In accordance with the lease agreement, the Company made leasehold improvements in exchange for a rent fee discount of $67 which will be spread over the initial lease period.

The Company includes renewal options that it is reasonably certain to exercise in the measurement of the lease liabilities. In December 2023, the Company exercised the option to extend the lease period for an additional term of 24 months (from March 1, 2024, to February 28, 2026).

On June 20, 2024, Gix Media and the lessor of its offices entered into a lease termination agreement. According to the agreement, the lease, which originally had a termination date of February 28, 2026, terminated on June 30, 2024. In compensation for the lessor’s consent to early termination Gix Media paid to the lessor $7 in cash and $62 in office furniture and equipment, as per the carrying values of such assets on the Company’s books as of the early termination date.

As a result of the early termination of the agreement, the Company recorded a capital loss of $46 in other expenses in its statement of operations for the nine months period ended September 30, 2024.

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NOTE 5: GOODWILL AND INTANGIBLE ASSETS, NET

A. Composition:

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NOTE 5: GOODWILL AND INTANGIBLE ASSETS, NET (Cont.)

B. Impairment of goodwill:

As of June 30, 2024, the Company identified indicators of impairment of the digital content reporting unit. As a result, the Company performed an impairment test which included a quantitative analysis of the fair value of the reporting unit. The fair value was estimated using the income approach, which is based on the present value of the future cash flows attributable to the reporting unit. The Company compared the fair value of the reporting unit to its carrying amount. As the carrying amount exceeded the fair value, the Company recognized an impairment loss of $4,739 which was driven mainly due to the Cortex Adverse Effect (see note 1.E) and due to a decrease in the cash flow projections.

As of December 31, 2023, the Company recognized an impairment loss of $5,107 related to the digital content reporting unit.

NOTE 6: LOANS

A. Composition of long-term and short-term loans and convertible loans of the Group:

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B. Gix Media’s Loan Agreement and short-term loans

On January 23, 2023, Gix Media acquired an additional 10% of Cortex’s capital shares which was financed by Gix Media’s existing cash balances and by a long-term bank loan received on January 17, 2023, in the amount of $1,500 to be repaid in 42 monthly payments at an annual interest rate of SOFR + 5.37%.

On June 13, 2024, Gix Media and Leumi entered into an addendum to an existing loan agreement between the parties which was effective from May 15, 2024, pursuant to which, inter alia: (i) the addendum will be effective until August 31, 2024; (ii) the Company is obligated to transfer to Gix Media $600; (iii) a new covenant, measured by reference to positive EBTIDA was implemented; (iv) all payments due to Leumi Long-term bank loan 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; (v) a new $350 loan was granted to Gix Media on June 13, 2024 which was repaid in full on August 30, 2024, alongside the existing credit facility to Gix Media, which remains equal to 80% of Gix Media’s customer balance (“Gix Media Credit Line”); (vi) Gix Media is obligated to perform a reduction in expenses, including reduction in force.

As of September 30, 2024, Gix Media has drawn $893 of the Gix Media Credit Line.

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 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 the Financing Agreement and an additional short-term loan in the amount of $160, 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.

On September 16, 2024, Gix Media repaid an aggregate amount of $350, consisting of the short-term bank loan in the amount of $160 and principal amounts of the long-term bank loans totaling $190. On the same date, Gix Media received a new short-term bank loan of $350 which replaced the repaid amounts. The new loan bears an annual interest rate of SOFR + 4.60% and isto be repaid in one single payment on January 2, 2025.

On September 19, 2024, Gix Media received a short-term loan of $75. The loan bears an annual interest rate of SOFR + 4.60% and isto be repaid in monthly installments of $25 over a 3-month period from October to December 2024.

C. Cortex’s Loan Agreement:

On September 21, 2022, Cortex and Leumi entered into an addendum to an existing loan agreement between the parties, dated August 15, 2020 (“Cortex Loan Agreement”). As part of the addendum to the Cortex Loan Agreement, Leumi provided Cortex with a monthly renewable credit line of $1,500 (the “Cortex Credit Line”). The Cortex Credit Line is determined every month at the level of 70% of Cortex’s customers’ balance. The amounts that are drawn from the Cortex Credit Line bear an annual interest of SOFR + 3.52%.

On April 27, 2023, Leumi increased the Cortex Credit Line by $1,000. In September 2023, Cortex and Leumi entered into an additional addendum to the Cortex Loan Agreement, in which Leumi extended the Cortex Credit Line of $2,500 by one year which will expire on September 20, 2024. The amounts that are drawn from the Cortex Credit Line bear an annual interest of SOFR + 4.08%.

On May 27, 2024, Cortex and Leumi entered into an amendment to Cortex Loan Agreement, pursuant to which, the credit line to Cortex will be 80% of Cortex’s customer balance and up to $2,000.

On August 15, 2024, Cortex and Leumi entered into an additional amendment to Cortex’s Loan Agreement, pursuant to which, the credit linein the amount of $2,000 to Cortex will be extended until February 27, 2025 and bears an annual interest of SOFR + 4.35%.

As of September 30, 2024, Cortex has drawn $950 of the Cortex Credit Line.

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D. Long term loan and issuance of warrants:

On November 15, 2023, Viewbix Israel entered into a Loan Agreement (the “2023 Loan”) with certain lenders (the “Lenders”) whereby the Lenders provided Viewbix Israel with loans in the aggregate amount of $480. In connection with the 2023 Loan, the Company issued to each lender a warrant to purchase shares of common stock (the “2023 Warrants”). The 2023 Warrants are exercisable to 480,000 shares of common stock, at an exercise price of $0.50 per share and will expire and cease to be exercisable on December 31, 2025. The Company recorded the 2023 Warrants as an equity instrument.

The terms of the 2023 Loan were substantially amended on June 18, 2024, by the June 2024 Facility Agreement (see note 6.E). These amendments represent a substantial modification in accordance with ASC Topic 470. Accordingly, the terms modification was accounted for as an extinguishment of the original financial liability and the initial recognition of new financial instruments issued at their fair value as of the effective date of the June 2024 Facility Agreement. As a result of the substantial modification of terms, the Company recognized finance expense of $2,515 in its interim condensed consolidated statement of operations for the nine months period ended September 30, 2024.

E. June 2024 Facility Agreement:

On June 18, 2024, the Company entered into a credit facility agreement which was amended and restated on July 22, 2024 (the “June 2024 Facility Agreement”) for a $1 million credit facility (the “June 2024 Facility Loan Amount”) with a group of lenders including L.I.A. Pure Capital Ltd (the “June 2024 Lead Lender”, and collectively, the “June 2024 Lenders”). In addition to the June 2024 Facility Loan Amount, the June 2024 Facility Agreement includes $531 of outstanding debt owed by the Company 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”).

The term (the “June 2024 Facility Term”) of the June 2024 Facility Agreement 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 the Company’s shares of common stock to a national securities exchange (the “Uplist”) occurs prior to the Initial Maturity Date, the June 2024 Facility Term will 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 amount of $350 was drawn down on the date of the Prior June 2024 Facility Agreement, (ii) an aggregate amount of $150 drawn down upon the filing of the Company’s PIPE Registration Statement (as defined in note 12.A) and (iii) an amount of $500 drawn down upon the effectiveness of the Uplist.

The June 2024 Facility Loan Amount accrues interest at a rate of 12% per annum, and the Company will also pay such interest on the June 2024 Prior Loan Amount, which is equal to $184 (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 the Company’s 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”).

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E. June 2024 Facility Agreement (Cont.):

Immediately following the effectiveness of the Uplist, (i) $663 of the June 2024 Loan Amount will convert into shares of common stock at a conversion rate equal to $0.25 per share of the Company’s common stock (the “June 2024 Convertible Stock”) and (ii) the company 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 the Company’s 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 Facility Agreement, the June 2024 Lenders may elect to convert after the effectiveness of the Uplist 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 and will have athree-year term from the issuance date.

In addition and in connection with the June 2024 Facility Agreement, the Company agreed to pay 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”).

In July 2024, following the closing of the Private Placement (as defined in note 9.B), the exercise price of the June 2024 Lead Lender Warrant was adjusted to $0.118, which is the effective price per share of common stock in the Private Placement, 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 of 21,186,440 shares, such that the adjusted exercise price and number of warrants issued is equal to an aggregate amount of $2.5 million.

The conversion related features of the June 2024 facility loan were bifurcated from their host debt contract and recognized as liabilities measured at fair value at each cut-off date. The facility loan was initially recorded at its fair value and subsequently measured at cost. The shares and Warrants A issued as prepayment of interest and as commission to the 2024 Lead Lender were initially recognized at fair value and classified in equity.

The June 2024 Lead Lender Fee Warrants was initially recognized in fair value at the amount of $1,833 and classified as a liability measured at fair value at each cut-off date. Following the closing of the Private Placement and the adjustments made to the number of shares in the June 2024 Lead Lender Fee Warrants as part of the June 2024 Facility Agreement, the June 2024 Lead Lender Fee Warrants were reclassified as equity.

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F. First July 2024 Facility Agreement

On July 4, 2024, the Company entered into a credit facility agreement, as restated on July 22, 2024, and amended on July 25, 2024 (the “First July 2024 Facility Agreement”) for a $2.5 million (the “First July 2024 Facility Loan Amount”) with a certain lender (the “First July 2024 Lender”).

The First July 2024 Facility Loan Amount will remain available until the earliest 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 will be repaid to the lender immediately.

The First July 2024 Facility Agreement sets forth a drawdown schedule as follows:(i) an aggregate of $50 was drawn down on July 4, 2024, (ii) an aggregate of $50 will be drawn down upon the effectiveness of the Uplist (see note 6.E), and (iii) following the Uplist, an aggregate of $200 will be drawn down on a quarterly basis until the First July 2024 Facility Loan Amount is exhausted.

The First July 2024 Facility Amount will accrue interest at a rate of 12% per annum. The interest for the first year was paid in advance in (i)1,200,000 shares of the Company’s common stock at a conversion rate of $0.25, and (ii)1,200,000 warrants to purchase such number of shares of the Company’s common stock at a conversion rate of $0.25 (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 and will have athree-year term from the issuance date.

Immediately following the effectiveness of the Uplist, (i) $100 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) the Company 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”). The remaining First July 2024 Facility Loan Amount outstanding and not converted following the Uplist will 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 will be repaid to the First July 2024 Lender.

In addition, the Company agreed to pay the First July 2024 Lender a one-time fee consisting of: (i)500,000 shares of the Company’s 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 the Company’s common stock with an exercise price of $0.25 per share.

In connection with the First July 2024 Facility Agreement, the Company received a loan of $50 which was recorded as a short-term convertible loan. The fair value of this loan was substantially the same as the amount received. Warrants associated with the First July 2024 Facility Agreement were measured at fair value and recorded as equity.

As of September 30, 2024, the Company incurred deferred debt issuance costs of $375 which were recorded in other current assets in the Company’s Balance Sheet. These costs consisted of a one-time fee to the First July 2024 Lender, annual advance interest payment and other additional direct costs.

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G. Second July 2024 Facility Agreement

On July 28, 2024, the Company entered into a credit facility agreement (the “Second July 2024 Facility Agreement”) for a $3.0 million (the “Second July 2024 Facility Loan Amount”) with certain lenders (the “Second July 2024 Lenders”).

The Second July 2024 Facility Loan Amount will remain available until the earliest 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 will be repaid to the Second July 2024 Lenders immediately thereafter.

The Second July 2024 Facility Loan Amount will accrue interest at a rate of 12% per annum. The interest for the first year was paid in advance in (i)1,440,000 shares of the Company’s common stock at a conversion rate of $0.25, and (ii)1,440,000 warrants to purchase such number of shares of the Company’s common stock at a conversion rate of $0.25 (the “Second July 2024 Facility Warrants”). the interest for the second year will be paid by the Company in cash. The Second July 2024 Facility Warrants are exercisable upon issuance at an exercise price of $0.25 per share of common stock and will have athree-year term from the issuance date.

Immediately following the effectiveness of the Uplist, (i) $160 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) the Company 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”). The remaining Second July 2024 Facility Loan Amount outstanding and not converted following the Second Uplist Conversion will 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 will be repaid to the Second July 2024 Lenders.

In addition, the Company agreed to pay the Second July 2024 Lenders a one-time fee consisting of 600,000 shares of the Company’s common stock, representing five percent (5%) of the Second July 2024 Facility Loan Amount at a conversion rate of $0.25.

In connection with the Second July 2024 Facility Agreement, the Company received a loan of $80 which was recorded as a short-term convertible loan. The fair value of this loan was substantially the same as the amount received. Warrants associated with the Second July 2024 Facility Agreement were measured at fair value and recorded as equity.

As of September 30, 2024, the Company incurred deferred debt issuance costs of $355 which were recorded in other current assets in the Company’s Balance Sheet. These costs consisted of a one-time fee to the Second July 2024 Lenders, annual advance interest payment and other additional direct costs.

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NOTE 7: FINANCIAL INSTRUMENTS AT FAIR VALUE

Financial instruments:

The Company has financial instruments measured at level 3 under the June 2024 Facility Agreement (see note 6.E).

The fair value of the financial instruments under the June 2024 Facility Agreement, as of June 18, 2024, was calculated using the following unobservable inputs: share price: $0.118, expected volatility:125%, exercise price: $0.25, risk-free interest rate: 4.41%, expected life:3.0 years.

The following table presents the level 3 financial liabilities - embedded derivatives roll-forward that were measured at fair value through profit or loss:

NOTE 8: COMMITMENTS AND CONTINGENCIES

Liens:

On September 19, 2022, as part of the Reorganization Transaction terms, the Company has provided several liens under Gix Media’s Financing Agreement with Leumi in connection with the Cortex Transaction, as follows: (1) a guarantee to Bank Leumi of all of Gix Media’s obligations and undertakings to Bank Leumi unlimited in amount; (2) a subordination letter signed by the Company to Leumi Bank; (3) A first ranking all asset charge over all of the assets of the Company; and (4) a Deposit Account Control Agreement over the Company’s bank accounts.

Gix Media has provided several liens under the Financing Agreement with Leumi in connection with the Cortex Transaction, as follows: (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 Gix Media’s full holdings in Cortex.

Gix Media restricted deposits in the amount of $8 as of September 30, 2024, are used as a security in respect of credit cards. Cortex has a restricted deposit in the amount of $34 as of September 30, 2024, is used as a security in respect of its leased offices.

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NOTE 9: SHAREHOLDERS’ EQUITY

A. Shares of Common Stock

Shares of Common Stock confer the rights to: (i) participate in the general meetings, to one vote per share for any purpose, to an equal part, on share basis, (ii) in distribution of dividends and (iii) to equally participate, on share basis, in distribution of excess of assets and funds from the Company and will not confer other privileges.

On May 18, 2023, the Company’s Board of Directors (the “Board”) approved to issue and grant 111,111 shares of restricted Common Stock (“Equity Grant”) to one of the Company’s directors (the “Director”). The Equity Grant was granted for consulting services provided to the Company by the Director, specifically in connection with securing favorable terms for a bank financing. The Company recorded a share-based compensation expense of $34 in general and administrative expenses in connection to the Equity Grant.

On June 18, 2024, as part of the June 2024 Facility Agreement the Company issued to June 2024 Lenders 934,716 shares of common stock and 934,716 warrants to purchase such number of shares of common stock with an exercise price of $0.25 per share. In addition, the Company issued to the June 2024 Lead Lender 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.

On July 4, 2024, as part of the First July 2024 Facility Agreement the Company issued to the First July 2024 Lender 1,700,000 shares of common stock and 2,200,000 warrants to purchase such number of shares of common stock with an exercise price of $0.25 per share.

On July 14, 2024 and July 25, 2024, the Company entered into consulting agreements with certain consultants (the “Consultants”) pursuant to which the Consultants agreed to provide certain services to the Company in connection with the Uplist (as defined in note 1.F). In consideration with the Consultants’ services, the Company issued to the Consultants 480,000 shares of common stock in July 2024. The Company recorded a share-based compensation expense of $57 in other expenses in connection with the issuance of shares to the Consultants.

On July 28, 2024, as part of the Second July 2024 Facility Agreement the Company issued to the Second July 2024 Lenders 2,040,000 shares of common stock and 1,440,000 warrants to purchase such number of shares of common stock with an exercise price of $0.25 per share.

B. Private Placement

On July 3, 2024, the Company entered into a definitive securities purchase agreement (the “Purchase Agreement”) with a certain investor (the “Lead Investor”) for the purchase and sale in a private placement (the “Private Placement”) of units consisting of (i)1,027,500 shares of the Company’s common stock at a purchase price of $0.25 per share (the “PIPE Shares”) and (ii) common stock purchase warrants to purchase up to 1,541,250 shares of the Company’s common stock (the “PIPE Warrants”) to the Lead Investor and other investors (collectively, the “Investors”) acceptable to the Lead Investor and the Company.

The aggregate gross proceeds received by the Company from the Private Placement were $257, of which $237 received in June 2024 and the $20 remaining received in July 2024. The PIPE Warrants are exercisable upon issuance at an exercise price of $0.25 per share and will have athree-year term from the issuance date. In addition, the PIPE Warrants are subject to an automatic exercise provision in the event that the Company’s shares of common stock are approved for listing on the Nasdaq Capital Market.

Upon the closing of the Private Placement, the Company agreed to pay the Lead Investor: (1) $10 for actual and documented fees and expenses incurred and, (2) a commission consisting of (i) a cash fee of $13 and (ii)51,375 shares of the Company’s common stock.

In July 2024, the Company issued 1,078,875 shares of common stock and 1,541,250 warrants in connection with the Private Placement. The Company incurred share issuance costs of $65 ($59 in cash and $6 in shares of common stock) which were recognized as a reduction of additional paid-in capital.

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C. Warrants

The following table summarizes information of outstanding warrants as of September 30, 2024:

D. Reverse stock split

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. As of the issuance date of this interim condensed consolidated financial statements, the reverse stock split is not yet effective.

E. Securities Exchange Agreement

On July 31, 2024, the Company entered into a Securities Exchange Agreement, with Metagramm Software Ltd. (“Metagramm”) pursuant to which the Company agreed to issue to Metagramm 9.99% of its issued and outstanding share capital in exchange for 19.99% of Metagramm’s issued and outstanding share capital. As of the date of approval of these financial statements, the Securities Exchange Agreement has not yet closed, and no shares have been issued.

F. Share option plan

In 2017, after the completion of Gix Media’s acquisition by the Parent Company, the Parent Company granted options to Gix Media’s employees. These options entitle the employees to purchase ordinary shares of the Parent Company that are traded on Tel-Aviv Stock Exchange.

On March 2, 2023, the Board approved the adoption of the 2023 Stock Incentive Plan (the “2023 Plan”). The 2023 Plan permits the issuance of up to (i)2,500,000 shares of Common Stock, plus (ii) an annual increase equal to the lesser of (A)5% of the Company’s outstanding capital stock on the last day of the immediately preceding calendar year; and (B) such smaller amount as determined by the Board, provided that no more than 2,500,000 shares of Common Stock may be issued upon the exercise of Incentive Stock Options. If any outstanding awards expire, are canceled or are forfeited, the underlying shares would be available for future grants under the 2023 Plan. As of the date of approval of the financial statements, the Company had reserved 2,500,000 shares of Common Stock for issuance under the 2023 Plan.

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F. Share option plan (Cont.)

The 2023 Plan provides for the grant of stock options, restricted stock, restricted stock units, stock or other stock-based awards, under various tax regimes, including, without limitation, in compliance with Section 102 and Section 3(i) of the Israeli Income Tax Ordinance (New Version) 5271-1961, and for awards granted to United States employees or service providers, including those who are deemed to be residents of the United States for tax purposes, Section 422 and Section 409A of the United States Internal Revenue Code of 1986.

In connection with the adoption of the 2023 Plan, on March 7, 2023, the Company entered into certain intercompany reimbursement agreements with two of its subsidiaries, Viewbix Israel and Gix Media (the “Recharge Agreements”). The Recharge Agreements provide for the offer of awards under the 2023 Plan to employees or service providers of Viewbix Israel and Gix Media (the “Affiliates”) under the 2023 Plan. Under the Recharge Agreements, the Affiliates will each bear the costs of awards granted to its employees or its service providers under the 2023 Plan and will reimburse the Company upon the issuance of shares of Common Stock pursuant to an award, for the costs of shares issued, but in any event not prior to the vesting of an award. The reimbursement amount will be equal to the lower of (a) the book expense for such award as recorded on the financial statements of one of the respective Affiliates, determined and calculated according to U.S. GAAP, or any other financial reporting standard that may be applicable in the future, or (b) the fair value of the shares of Common Stock at the time of exercise of an option or at the time of vesting of an RSU, as applicable.

On July 20, 2023, the Company granted 51,020 restricted share units (the “RSUs”) under the 2023 Plan to Gix Media’s CEO, as part of his employment terms, (the “Grantee”) under the following terms and conditions:(1)51,020 of Common Stock underlying the grant of RSUs (2) Vesting Commencement Date: July 1, 2023 (3) vesting schedule: 50% of the RSUs will vest immediately upon the Vesting Commencement Date (the “First Tranche”) and the remaining 50% of the RSUs will vest 12 months after the Vesting Commencement Date (the “Second Tranche”), provided, in each case, that the Grantee remains continuously as a Service Provider (as defined under the 2023 Plan) of Gix Media or its affiliates throughout each such vesting date (the “Grant”).

On July 1, 2023, upon the vesting of the First Tranche, the Company issued 25,510 shares of Common Stock to the Grantee. On July 1, 2024, upon the vesting of the Second Tranche, the Company issued 25,510 shares of Common Stock to the Grantee.

As of September 30, 2024 and December 31, 2023, the Company recorded a share-based compensation expense in general and administrative expenses of $38 and $12 in connection with the Grant.

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G. Dividends

On September 14, 2022, Gix Media declared a dividend to its shareholders prior to the consummation of the Reorganization Transaction in the amount of $1,000, of which an amount of $83 was paid as tax to the Israeli Tax Authority. During 2022 Gix Media distributed an amount of $787 out of the remaining amount of $917, which an amount of $714 that was distributed to the Parent Company, was offset from the loan to Parent Company. The remaining amount of $130 was distributed by Gix Media in January 2023.

On December 25, 2022, Cortex declared a dividend in the total amount of $445 to the non-controlling interests. The amount was distributed by Cortex to non-controlling interests in two payments of $219 and $226 in February and March 2023, respectively.

No dividends were distributed during the nine-month period ending September 30, 2024.

NOTE 10: FINANCIAL EXPENSE, NET

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NOTE 11: SEGMENT REPORTING

The Group operates intwo different segments in such a way that each company in the Group operates as a separate business segment.

Search segment- the search segment develops a variety of technological software solutions, which perform automation, optimization and monetization of internet campaigns, for the purposes of obtaining and routing internet user traffic to its customers.

Digital content segment- the digital content segment is engaged in the creation and editing of content, in different languages, for different target audiences, for the purposes of generating revenues from leading advertising platforms, including Google, Facebook, Yahoo and Apple, by utilizing such content to obtain internet user traffic for its customers.

The segments’ results include items that directly serve and/or are used by the segment’s business activity and are directly allocated to the segment. As such they do not include depreciation and amortization expenses for intangible assets created at the time of the purchase of those companies, financing expenses created for loans taken for the purpose of purchasing those companies and therefore these items are not allocated to the various segments.

Segments’ assets and liabilities are not reviewed by the Group’s chief operating decision maker and therefore were not reflected in the segment reporting.

Segments revenues and operating results:

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NOTE 11: SEGMENT REPORTING (Cont.)

The “adjustment” column for segment operating income includes unallocated selling, general, and administrative expenses and certain items which management excludes from segment results when evaluating segment performance, as follows:

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NOTE 11: SEGMENT REPORTING (Cont.)

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