QUANTUM X LABS INC.
For the period ended Dec 31, 2024. Filed Mar 21, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 21, 2025
QXL$3.69+4.8%Stored close · as of Nov 6, 2026
What changed in Risk Factors?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-25.
0001493152-24-011132
Item 1A. RISK FACTORSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-21.
0001493152-25-011100
Item 1A. RISK FACTORSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 152 previous paragraphs and 150 current paragraphs.
120 unchanged; 17 reworded; 12 added; 15 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 14 previous and 20 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
We may not be able to receive credit facility to fund our operations, on favorable terms, or at all.
Current report
We generally finance our operations primarily through a combination of cash flow generated from operations and borrowings under our credit facilities, loans, and through credit with our vendors. Our ability to access capital through our existing credit facilities and raise additional capital by expanding our credit facilities on economically favorable terms (including available borrowing line and the rate of interest charged thereunder) or at all, or if we are in violation of our financial covenants in the future and do not receive a waiver, depends on our ability to stay in compliance with the Financing Agreement. The Financing Agreement poses certain limitations, as explained elsewhere in this Annual Report. In addition, and as a result of the decrease in the Company’s revenues, our financial performance has been negatively impacted, which may affect the terms on which we are able to obtain credit facilities and loans.
Current report
If adequate capital is not available at the time we need it, we may have to curtail future growth or change our expansion plans, which could have a material adverse effect on us.
Current report
If borrowing under our existing credit facilities is reduced, or otherwise becomes unavailable, or we are unable to arrange substitute financing facilities or other sources of capital, our ability to fund our operations would be impaired, which would have a material adverse effect on our results of operations.
Current report
We may be unable to pay our obligations when they become due, including under the Financing Agreement.
Current report
We have financed our acquisitions principally through the raising of debt, credit facilities, and our operations through credit with our vendors. Our ability to continue our operations and to pay our obligations, including under the Financing Agreement and credit facilities (as described elsewhere in this Annual Report), when they become due is contingent upon obtaining additional financing.
Current report
In addition, during August 2024, we renegotiated the terms of the Financing Agreement and entered into the Fourth Addendum to the Financing Agreement. The availability of the credit facilities to Gix Media is subject to us successfully raising additional capital and depositing at least $2,000,000 with Gix Media. If the Company, Cortex and Gix Media cannot maintain compliance with the terms and covenant of the Financing Agreement, or if we are unable to obtain sufficient amounts of additional capital, we may be required to reduce the scope of our planned operations, and/or consider reductions in personnel costs or other operating costs, in addition to the measures currently contemplated pursuant to the Financing Agreement.
Current report
We may not be able to retain and attract programmatic advertisers, and the associated payments received from such programmatic advertisers’ ads on websites which have been categorized as “Made for Advertising” may be adversely affected.
Current report
Certain recent developments relating to publishers that are categorized by a number of programmatic advertisers as “Made for Advertising” (MFA) sites, including decisions made by leading media programmatic advertisers to prioritize different media categories and implement publishing restrictions in connection with MFA, have negatively impacted Cortex’s business and operations. In connection with the foregoing, a significant customer of Cortex has decided to stop advertising on Cortex’s sites. Additional advertising customers of Cortex may opt to stop advertising on Cortex’s sites, which will impact Cortex’s, and as a result thereof, the Company’s current and future revenue streams and results of operations. The foregoing issues could lead to decreased advertiser interest in Cortex’s sites, potentially resulting in lower bids for ad space, and as a result thereof, lower revenues from Cortex’s business, and decrease in the Company’s results of operation.
Current report
The most comprehensive legislation passed in the area of AI in the European Union is the EU Artificial Intelligence Act (the “EU AI Act”), effective from February 2, 2025, with different provisions becoming gradually applicable on different dates. The EU AI Act contains a list of prohibited practices, classifies certain AI systems as high risk, depending on the level of risk they pose, includes transparency obligations for providers and deployers of certain AI systems, and includes obligations and requirements around general-purpose AI models and general-purpose AI systems. For example, fines for noncompliance include fines of the higher of €35,000,000 or up to 7 percent of a company’s total worldwide annual turnover for non-compliance with prohibited AI practices, or the higher of €7,500,000 or up to 1 percent of a company’s total worldwide annual turnover for the supply of incorrect, incomplete, or misleading information to notified bodies and national competent authorities in certain contexts. Noncompliance with the EU AI ACT could also result in other consequences such as loss of business opportunities or reputational damage.
Current report
Following the October 7th attacks by Hamas terrorists in Israel’s southern border, Israel declared war against Hamas and since then, Israel has been involved in military conflicts with Hamas, Hezbollah, a terrorist organization based in Lebanon, and Iran, both directly and through proxies like the Houthi movement in Yemen and armed groups in Iraq and other terrorist organizations. Additionally, following the fall of the Assad regime in Syria, Israel has conducted limited military operations targeting the Syrian army, Iranian military assets and infrastructure linked to Hezbollah and other Iran-supported groups. Although certain ceasefire agreements have been reached, and some Iranian proxies have declared a halt to their attacks, there is no assurance that these agreements will be upheld, military activity and hostilities continue to exist at varying levels of intensity, and the situation remains volatile, with the potential for escalation into a broader regional conflict involving additional terrorist organizations and possibly other countries. Also, the fall of the Assad regime in Syria may create geopolitical instability in the region.
Current report
While our facilities have not been damaged during the current war, the hostilities with Hamas, Hezbollah, Iran and its proxies and others have caused and may continue to cause damage to private and public facilities, infrastructure, utilities, and telecommunication networks, and potentially disrupting our operations and supply chains. In addition, Israeli organizations, government agencies and companies have been subject to extensive cyber attacks. This could lead to increased costs, risks to employee safety, and challenges to business continuity, with potential financial losses. The continuation of the war has also led to a deterioration of certain indicators of Israel’s economic standing, for instance, a downgrade in Israel’s credit rating by rating agencies (such as by Moody’s, S&P Global, and Fitch).
Removed paragraphs (15)
Previous report
We may not be able to generate enough cash flow to meet our debt obligations or fund our other liquidity needs.
Previous report
Our ability to pay the principal and interest of our Financing Agreement (as defined below) and to satisfy our other liabilities will depend upon future performance and our ability to repay or refinance our debt as it becomes due. Our future operating performance and ability to refinance will be affected by economic and capital market conditions, results of operations and other factors, many of which are beyond our control. Our ability to meet our debt obligations also may be impacted by changes in prevailing interest rates, as borrowings under our loans bear interest at floating rates. Failure to pay our loans might result in immediate repayment and / or realization of secured assets under the Financing Agreement, which include a floating lien on Gix Media’s assets, bank account, rights under the Cortex Transaction (as defined below), Gix Media’s intellectual property and holdings in Cortex.
Previous report
If we fail to maintain effective internal controls over financial reporting, the price of our Common Stock may be adversely affected.
Previous report
Our internal control over financial reporting may have material weaknesses and conditions that could require correction or remediation, the disclosure of which may have an adverse impact on the price of our Common Stock. We are required to establish and maintain appropriate internal controls over financial reporting. Failure to establish those controls, or any failure of those controls once established, could adversely affect our public disclosures regarding our business, prospects, financial condition or results of operations. In addition, management’s assessment of internal controls over financial reporting may identify material weaknesses and conditions that need to be addressed in our internal controls over financial reporting or other matters that may raise concerns for investors. Any actual or perceived weaknesses and conditions that need to be addressed in our internal control over financial reporting or disclosure of management’s assessment of our internal controls over financial reporting may have an adverse impact on the price of our Common Stock.
Previous report
Management evaluated the effectiveness of the Company’s disclosure controls and procedures as of December 31, 2023 and concluded that the material weakness previously identified in our Annual Report on Form 10-K for the year ended December 31, 2022 has been remediated and the Company’s disclosure controls and procedures were effective as of the end of December 31, 2023. However, ifwe identify future material weaknesses in ourdisclosure controls and proceduresand if we are unable to implement any of the required changes to ourdisclosure controls and procedures effectively, it could lead investors to question the reliability and accuracy of our reported financial information and could adversely impact the market price of our Common Stock.
Previous report
In connection with the preparation and issuance of our financial statements for the year ended December 31, 2022, our management identified a material weakness in our internal control over financial reporting. In response to that material weakness, we implemented a remediation plan and reviewed our existing processes and controls in order to identify additional control deficiencies and designed new controls or adjusted the design of our existing controls in order to improve our processes and controls and have subsequently remediated such material weakness in connection with the preparation of the financial statements for the year ended December 31, 2023. We cannot assure you that management will not determine in the future that our internal control over financial reporting is not effective and we cannot predict how the market prices of our shares of Common Stock will be affected; however, we believe that there is a risk that investor confidence and share value may be negatively affected.
Previous report
Upon the completion of our planned Reincorporation from the State of Delaware to the State of Nevada our affairs will cease to be governed by the DGCL and will be subject to the Nevada Revised Statutes. Our status as a Nevada corporation, provisions in our Articles of incorporation and bylaws to be adopted upon the completion of the Reincorporation, and the anti-takeover provisions of the Nevada Revised Statutes, may also discourage, delay or prevent a change in control.
Previous report
Our planned Reincorporation to the State of Nevada could have significant legal, tax, and governance implications for us and our stockholders, could expose us to additional risks and uncertainties and we may not realize the expected benefits of the Reincorporation.
Previous report
Our planned Reincorporation could subject us to different or more stringent corporate governance and disclosure requirements. Nevada law differs from Delaware law in various respects that could affect the rights and obligations of us and our stockholders. For example, the Reincorporation will result in the elimination of any liability of an officer or director for a breach of the duty of loyalty unless arising from intentional misconduct, fraud or a knowing violation of law. In addition, it is intended that the Reincorporation will qualify as a tax-free reorganization under the U.S. Internal Revenue Code of 1986, as amended (the “Code”). However, this tax treatment is not free from doubt. Other tax advisors may not agree with our intended tax treatment and the IRS may assert, or a court may sustain, a contrary position. If the Reincorporation does not qualify as a tax-free reorganization, our stockholders may recognize taxable gain or loss upon their exchange of stock pursuant to the Reincorporation, as applicable. We urge our stockholders to consult their own tax advisors regarding the potential tax consequences of the Reincorporation.
Previous report
Furthermore, the Reincorporation could involve significant costs, delays, and uncertainties. The Reincorporation is subject to the satisfaction of certain conditions, such as the receipt of regulatory approvals, the filing of appropriate documents with the Delaware and Nevada authorities, and the completion of certain corporate formalities. The Reincorporation could also result in litigation or disputes with our stockholders, creditors, regulators, or other parties, which could divert our resources and attention from our core operations.
Previous report
There can be no assurance that the anticipated benefits of the Reincorporation will be achieved. Achieving the anticipated benefits of the Reincorporation is subject to a number of risks and uncertainties, including factors that we do not and cannot control. If the Reincorporation is not completed successfully or is delayed, we may incur additional expenses, lose potential opportunities, or face adverse consequences for our business and reputation. In addition, if the expected benefits of the Reincorporation do not meet expectations of investors or securities analysts, the price of our Common Stock may decline.
Previous report
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 addition, since the commencement of these events, there have been continued hostilities along Israel’s northern border with Lebanon (with the Hezbollah terror organization) and southern border (with the Houthi movement in Yemen, as described below). It is possible that hostilities with Hezbollah in Lebanon will escalate, and that other terrorist organizations, including Palestinian military organizations in the West Bank as well as other hostile countries, such as Iran, will join the hostilities. Such clashes may escalate in the future into a greater regional conflict.
Previous report
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, that may involve a downgrade in Israel’s credit rating by rating agencies (such as the recent downgrade by Moody’s of its credit rating of Israel from A1 to A2, as well as the downgrade of its outlook rating from “stable” to “negative”), which may have a material adverse effect on the Company and its ability to effectively conduct its operations.
Previous report
Some countries around the world restrict doing business with Israel and Israeli companies, and additional countries may impose restrictions on doing business with Israel and Israeli companies if hostilities in Israel or political instability in the region continue or increase. In addition, there have been increased efforts by countries, activists and organizations to cause companies and consumers to boycott Israeli goods and services. In January 2024, the International Court of Justice, or ICJ, issued an interim ruling in a case filed by South Africa against Israel in December 2023, making allegations of genocide amid and in connection with the war in Gaza, and ordered Israel, among other things, to take measures to prevent genocidal acts, prevent and punish incitement to genocide, and take steps to provide basic services and humanitarian aid to civilians in Gaza. There are concerns that companies and businesses will terminate, and may have already terminated, certain commercial relationships with Israeli companies following the ICJ decision. The foregoing efforts by countries, activists and organizations, particularly if they become more widespread, as well as the ICJ rulings and future rulings and orders of other tribunals against Israel (if handed), may materially and adversely impact our ability to sell and provide our products and services outside of Israel.
Previous report
Furthermore, following Hamas’ attack on Israel and Israel’s security cabinet declaration of war against Hamas, the Houthi movement, which controls parts of Yemen, launched a number of attacks on marine vessels traversing the Red Sea, which marine vessels were thought to either be in route towards Israel or to be partly owned by Israeli businessmen. It is possible that other terrorist organizations, including Palestinian military organizations in the West Bank, as well as other hostile countries, such as Iran, will join the hostilities. Such hostilities may include terror and missile attacks. In the event that our facilities are damaged as a result of hostile actions, or hostilities otherwise disrupt our ongoing operations, our ability to offer our platforms could be materially and adversely affected.
Reworded paragraphs (17)
Previous wording
Our top ten customers represented approximately 65% and 68% of our consolidated revenue for the years ended December 31, 2023 and 2022, respectively on a pro forma basis. It is likely that we will depend on a relatively small number of customers for a significant portion of our revenue in the future. If a top customer fails to pay us, cash flow from operations would be impacted and our operating results and financial condition could be harmed. Additionally, if we were to lose a material customer, we may not be able to offer our services at similar utilization or pricing levels and such loss could have an adverse effect on our business until the services are offered at similar utilization or pricing levels.
Current wording
Our top ten customers represented approximately 79% and 65% of our consolidated revenue for the years ended December 31, 2024 and 2023, respectively on a pro forma basis. It is likely that we will depend on a relatively small number of customers for a significant portion of our revenue in the future. If a top customer fails to pay us, cash flow from operations would be impacted and our operating results and financial condition could be harmed. Additionally, if we were to lose a material customer, we may not be able to offer our services at similar utilization or pricing levels and such loss could have an adverse effect on our business until the services are offered at similar utilization or pricing levels.
Previous wording
Global pandemics such as the continued outbreak of the COVID-19 pandemic may negatively impact the global economy in a significant manner for an extended period of time, and also adversely affect our business and operating results.
Current wording
Global pandemics may negatively impact the global economy in a significant manner for an extended period of time, and also adversely affect our business and operating results.
Previous wording
The outbreak of a global pandemic, such as the COVID-19 pandemic, may result in a widespread health crisis that may adversely affect businesses, economies and financial markets worldwide, and as a result placing constraints on the operations of businesses, decreased consumer mobility and activity, and significant economic volatility in international capital markets. For example, the COVID-19 pandemic has caused an economic recession, high unemployment rates and other disruptions, both in the United States, Israel and the rest of the world. While the COVID-19 pandemic has not adversely affected our business, an additional outbreak of the COVID-19 and other global pandemics and any of these impacts, including the prolonged continuation of these impacts, could in the future, adversely affect our business and operating results and heighten many of the other risks described in these “Risk Factors.”
Current wording
The outbreak of a global pandemic, may result in a widespread health crisis that may adversely affect businesses, economies and financial markets worldwide, and as a result placing constraints on the operations of businesses, decreased consumer mobility and activity, and significant economic volatility in international capital markets. For example, during the years 2020-2021, the COVID-19 pandemic caused an economic recession, high unemployment rates and other disruptions, both in the United States, Israel and the rest of the world. While the COVID-19 pandemic has not adversely affected our business, an outbreak of other global pandemics and any of these impacts, including the prolonged continuation of these impacts, could in the future, adversely affect our business and operating results and heighten many of the other risks described in these “Risk Factors.”
Previous wording
These companies, along with other large and established Internet and technology companies, may also leverage their power to make changes to their web browsers, operating systems, platforms, networks or other products or services in a way that impacts the entire digital advertising marketplace.
Current wording
These companies, along with other large and established Internet and technology companies, may also leverage their power to make changes to their web browsers, operating systems, platforms, networks or other products or services in a way that impacts the entire digital advertising marketplace. If we fail to comply or adopt to such changes, on the same level as our competitors, it may harm our ability to compete effectively in our market and operate in our market.
Previous wording
Our services continuing and uninterrupted performance is critical to our success. Our services are dependent on the performance and reliability of internet, mobile, and other infrastructure services that are not under our control. For example, we currently host our services and support our operations using a third-party provider of cloud infrastructure services. While we have engaged reputable vendors to provide these products or services, we do not have control over the operations of the facilities or systems used by our third-party providers. These facilities and systems may be vulnerable to damage or interruption from natural disasters, cybersecurity attacks, human error, terrorist attacks, power outages, pandemics, and similar events or acts of misconduct. In addition, any changes in one of our third-party service provider’s service levels may adversely affect our ability to meet the requirements of our customers. For example, in 2023 we experienced a decrease of user traffic acquisition on our Content Platform from Third-Party Platforms which resulted primary from technological changes and content policy changes on such Third-Party Platforms, causing a lower number of users to reach the Cortex Websites and thus decreasing the exposures to the ads displayed on the Cortex Websites. While we believe we have implemented reasonable backup and disaster recovery plans, we expect that in the future we may experience interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions, capacity constraints, or external factors beyond our control. Sustained or repeated system failures would reduce the attractiveness of our platforms and services. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times, as we expand our platforms and service offerings. Any negative publicity or user dissatisfaction arising from these disruptions could harm our reputation and brand, may adversely affect the usage of our offerings, and could harm our business, financial condition and results of operation.
Current wording
Our services continuing and uninterrupted performance is critical to our success. Our services are dependent on the performance and reliability of internet, mobile, and other infrastructure services that are not under our control. For example, we currently host our services and support our operations using a third-party provider of cloud infrastructure services. While we have engaged reputable vendors to provide these products or services, we do not have control over the operations of the facilities or systems used by our third-party providers. These facilities and systems may be vulnerable to damage or interruption from natural disasters, cybersecurity attacks, human error, terrorist attacks, power outages, pandemics, and similar events or acts of misconduct. In addition, any changes in one of our third-party service provider’s service levels may adversely affect our ability to meet the requirements of our customers.
Previous wording
Our business increasingly relies on artificial intelligence technologies. The regulatory framework for this technology is rapidly evolving, and we may not always be able to anticipate how to respond to these laws or regulations. Many federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations governing the use of such technologies. There is also an increase in litigation in a number of jurisdictions, including the United States, relating to the development, security and use of artificial intelligence.
Current wording
Our business increasingly relies on artificial intelligence technologies. The legislative and regulatory framework for this technology is rapidly evolving, and we may not always be able to anticipate how to respond to these laws or regulations. Many federal, state and foreign government bodies and agencies have introduced or are currently considering additional laws and regulations governing the use of such technologies. There is also an increase in litigation in a number of jurisdictions, including the United States, relating to the development, security and use of artificial intelligence.
Previous wording
For example, in October 2023, President Biden issued the Executive Order on Safe, Secure and Trustworthy Artificial Intelligence (“The Order”) with the goal of promoting the “safe, secure, and trustworthy development and use of artificial intelligence in the United States.” The Order has established certain new standards for the training, testing and cybersecurity of sophisticated artificial intelligence models, and the Order has also instructed other federal agencies to promulgate additional regulations within certain timeframes from the date of the Order. Federal artificial intelligence legislation has also been introduced in the U.S. Senate. Such additional regulations may impact our ability to develop, use and commercialize artificial intelligence and machine learning technologies in the future.
Current wording
For example, on May 17, 2024, Colorado enacted the Colorado AI Act. The Colorado AI Act creates duties for developers and for those that deploy AI. There is a specific focus on bias and discrimination. The Act will go into effect on February 1, 2026. Federal artificial intelligence legislation has also been introduced in the U.S. Senate. Such additional regulations may impact our ability to develop, use and commercialize artificial intelligence and machine learning technologies in the future. Furthermore, in October 2023, President Biden issued the Executive Order on Safe, Secure and Trustworthy Artificial Intelligence (“The Order”) with the goal of promoting the “safe, secure, and trustworthy development and use of artificial intelligence in the United States.” The Order established certain new standards for the training, testing and cybersecurity of sophisticated artificial intelligence models, and instructed other federal agencies to promulgate additional regulations. Even though The Order was rescinded by President Trump on January 20, 2025, it may still indicate a trend towards federal AI regulation, which could increase our potential liability and adversely affect our business.
Previous wording
It is possible that the US artificial intelligence framework, along with the adoption of new laws and regulations in other jurisdictions, or the interpretation of existing laws and regulations, may affect the operation of our platforms and services and the way in which we use artificial intelligence, including with respect to how we train our models, unintentional bias and discrimination. Failure to comply with such laws or regulations could subject us to legal or regulatory liability. Further, the cost of complying with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.
Current wording
It is possible that the adoption of new laws and regulations in other jurisdictions, or the interpretation of existing laws and regulations, may affect the operation of our platforms and services and the way in which we use artificial intelligence, including with respect to how we train our models, unintentional bias and discrimination. Failure to comply with such laws or regulations could subject us to legal or regulatory liability. Further, the cost of complying with such laws or regulations could be significant and would increase our operating expenses, which could adversely affect our business, financial condition and results of operations.
Previous wording
As of December 31, 2023, we had outstanding: (i) Class J Warrants exercisable to purchase 130,333 shares of Common Stock at an exercise price of $13.44 per share of Common Stock; and (ii) Class K Warrants exercisable to purchase 130,333 shares of Common Stock, at an exercise price of $22.40 per share of Common Stock and (iii) 2023 Warrants exercisable to purchase 480,000 shares of Common Stock, at an exercise price of $0.50 per share of Common Stock.
Current wording
As of December 31, 2024, we had outstanding: (i) Class J Warrants exercisable to purchase 32,584 shares of Common Stock at an exercise price of $53.76 per share of Common Stock; (ii) Class K Warrants exercisable to purchase 32,584 shares of Common Stock, at an exercise price of $89.60 per share of Common Stock; (iii) 2023 Warrants exercisable to purchase 120,000 shares of Common Stock, at an exercise price of $2.00 per share of Common Stock; (iv) June 2024 Facility Warrants exercisable to purchase 183,679 shares of Common Stock at an exercise price of $1.00 per share of Common Stock; (v) a June 2024 Lead Lender Warrant exercisable to purchase 50,000 shares of Common Stock at an exercise price of $1.00 per share of Common Stock; (vi) a June 2024 Lead Lender Fee Warrant exercisable to purchase 5,296,610 shares of Common Stock at an exercise price of $0.472 per share of Common Stock; (vii) PIPE Warrants exercisable to purchase 385,332 shares of Common Stock at an exercise price of $1.00 per share of Common Stock; (vii) First July 2024 Facility Warrants exercisable to purchase 300,000 shares of Common Stock at an exercise price of $1.00 per share of Common Stock; (viii) First July 2024 Facility Fee Warrant exercisable to purchase 250,000 shares of Common Stock at an exercise price of $1.00 per share of Common Stock and (ix) Second July 2024 Facility Warrants exercisable to purchase 360,000 shares of Common Stock at an exercise price of $1.00 per share of Common Stock.
Previous wording
We are authorized to issue 490,000,000 shares of Common Stock, of which, as of December 31, 2023, 14,920,585 shares of Common Stock were outstanding. Additional shares of Common Stock may be issued by our Board of Directors without further stockholder approval. The issuance of large numbers of shares, possibly at below market prices, is likely to result in substantial dilution to the interests of other stockholders. In addition, issuances of large numbers of shares of Common Stock may adversely affect the market price of our Common Stock.
Current wording
We are authorized to issue 490,000,000 shares of Common Stock, of which, as of December 31, 2024, 5,296,945 shares of Common Stock were outstanding. Additional shares of Common Stock may be issued by our Board of Directors without further stockholder approval. The issuance of large numbers of shares, possibly at below market prices, is likely to result in substantial dilution to the interests of other stockholders. In addition, issuances of large numbers of shares of Common Stock may adversely affect the market price of our Common Stock.
Previous wording
On November 7, 2022, the OTC Markets Group downgraded the quotation of our Common Stock from the OTCQB Markets to the OTC Markets, Pink Tier. The shares of our Common Stock are thinly-traded meaning that the number of persons interested in purchasing our Common Stock at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.
Current wording
On November 7, 2022, the OTC Markets Group downgraded the quotation of our Common Stock from the OTCQB Markets to the OTC Markets, Pink Tier. Although on September 13, 2024, we submitted an application to uplist to the Nasdaq, the timing of the Nasdaq uplisting process will depend on a variety of factors, including, but not limited to, overall market conditions. No assurance can be given that our application will be approved or that a trading market will develop. The shares of our Common Stock are thinly-traded meaning that the number of persons interested in purchasing our Common Stock at or near bid prices at any given time may be relatively small or non-existent. This situation is attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price.
Previous wording
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, may impede our ability to operate and harm our financial results.
Current wording
Conditions in Israel, including Israel’s conflicts with Hamas and other parties in the region, as well as political and economic instability, may impede our ability to operate and harm our financial results.
Previous wording
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.
Current wording
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 and in recent years, armed conflicts between Israel and its neighboring countries and terrorist organizations active in the region have involved missile strikes, hostile infiltrations, terrorism against civilian targets in various parts of Israel, and recently abduction of soldiers and citizens.
Previous wording
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. Although many of such military reservists have since been released, they may be called up for additional reserve duty, depending on developments in the war in Gaza and along Israel’s other borders. 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, as well as the other pending or future armed conflicts in which Israel is or may become engaged, 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. Additionally, the absence of employees of our Israeli suppliers and contract manufacturers due to their military service in the current or future wars or other armed conflicts may disrupt their operations, which in turn may materially and adversely affect our ability to deliver or provide products and services to customers.
Current wording
In connection with the ongoing war, several hundred thousand Israeli military reservists were drafted to perform immediate military service, and military reservists are expected to perform long reserve duty service in the coming years. As of date of this Annual Report, none of our employees or consultants in Israel have been called to reserve duty and there has been no material impact on our business from past reserve services. However, certain of our employees and consultants in Israel, in addition to employees of our service providers located in Israel, may be called, for service in the current or future wars or other armed conflicts with Hamas, as well as the other pending or future armed conflicts in which Israel is or may become engaged, 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. Additionally, the absence of employees of our Israeli suppliers and contract manufacturers due to their military service in the current or future wars or other armed conflicts may disrupt their operations, which in turn may materially and adversely affect our ability to deliver or provide products and services to customers.
Previous wording
The hostilities with Hamas, Hezbollah and other organizations and countries have included and may include terror, missile and drone attacks. In the event that our facilities are damaged as a result of hostile actions, or hostilities otherwise disrupt our ongoing operations, our ability to deliver or provide products and services in a timely manner to meet our contractual obligations towards customers and vendors could be materially and adversely affected. 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.
Current wording
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.
Previous wording
As of the date of this Annual Report, the Company’s revenues have not been directly negatively affected by the ongoing hostilities in the region, as the primary source of its revenues is predominantly from the U.S. or European markets, that have been not significantly impacted by the ongoing hostilities in Israel. As a result, as of the date of this Annual Report the Company’s abilities to deliver or provide products and services to its customers have not been materially affected. However, the absence of the Chief Exectuvie Officer of Gix Media and other employees of the Company, have adversely affected the Company’s customer relationship management, operational and functional continuity, and delayed a portion of the Company’s planned activities during the fourth quarter of 2023. These effects indirectly contributed to a decline in the Company’s revenues, profitability, and cash flow for the year ended December 31, 2023. We cannot currently assess how the ongoing hostilities will negatively affect our business conditions and harm our results of operations in the future, due to the factors and risks discussed above.
Current wording
As of the date of this Annual Report, the Company’s revenues have not been directly negatively affected by the ongoing hostilities in the region, as the primary source of its revenues is predominantly from the U.S. or European markets, that have been not significantly impacted by the ongoing hostilities in Israel. As a result, as of the date of this Annual Report the Company’s abilities to deliver or provide products and services to its customers have not been materially affected.
Previous wording
Finally, political conditions within Israel may affect our operations. Israel has held five general elections between 2019 and 2022, and prior to 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, 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. To date, these initiatives have been substantially put on hold. If such changes to Israel’s judicial system are again pursued by the government and approved by the parliament, this 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.
Current wording
Finally, prior to the October 2023 war, the Israeli government pursued changes to Israel’s judicial system and has recently renewed its efforts to effect such changes. In response to the foregoing developments, certain individuals, organizations, and institutions, both within and outside of Israel, voiced concerns that such proposed changes, if adopted, may negatively impact the business environment in Israel. Such proposed changes may also lead to political instability or civil unrest. If such changes to Israel’s judicial system are pursued by the government and approved by the parliament, this may have an adverse effect on our business, results of operations, and ability to raise additional funds, if deemed necessary by our management and board of directors.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
While we believe we have implemented reasonable backup and disaster recovery plans, we expect that in the future we may experience interruptions, delays and outages in service and availability from time to time due to a variety of factors, including infrastructure changes, human or software errors, website hosting disruptions, capacity constraints, or external factors beyond our control. Sustained or repeated system failures would reduce the attractiveness of our platforms and services. It may become increasingly difficult to maintain and improve our performance, especially during peak usage times, as we expand our platforms and service offerings. Any negative publicity or user dissatisfaction arising from these disruptions could harm our reputation and brand, may adversely affect the usage of our offerings, and could harm our business, financial condition and results of operation.