Overview

The following plan of operation provides information which management believes is relevant to an assessment and understanding of our results of operations and financial condition. The discussion should be read along with our consolidated financial statements and notes thereto. This section includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like believe, expect, estimate, anticipate, intend, project and similar expressions, or words which refer to future events. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our predictions.





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Organizational Background

The Registrant was incorporated in the State of Delaware on August 16, 1985, under a predecessor name, InFerGene Company. On August 25, 1995, a wholly owned subsidiary of InFerGene Company merged with Zaxis International, Inc., which following such merger, the surviving entity, InFerGene Company, changed its name to Zaxis International, Inc.

Emerald Medical Applications Ltd.

On March 16, 2015, Zaxis and Emerald Israel executed a share exchange agreement, which closed on July 14, 2015, and Emerald Israel became the Company's wholly-owned subsidiary. Accordingly, on September 14, 2015, the Company changed its name to Emerald Medical Applications Corp. On May 2, 2018, the District Court of Lod, Israel issued a winding-up order for Emerald Israel and appointed an Israeli attorney as special executor for Emerald Israel.

Virtual Crypto Technologies Ltd.

On January 17, 2018, the Company formed a new wholly-owned subsidiary, VCT. On February 22, 2018, the Company's name was changed from Emerald Medical Applications Corp. to Virtual Crypto Technologies, Inc. to reflect its new operations and business focus. On January 27, 2020, VCT Israel was sold to a third party for NIS 50,000 ($14,459).





Recapitalization Transaction

On February 7, 2019, the Company entered into the Recapitalization Transaction with Gix Internet, pursuant to which, Gix Internet assigned, transferred and delivered 99.83% of its holdings in Viewbix Israel, to the Company in exchange for Common Stock of the Company, which resulted in Viewbix Israel becoming a subsidiary of the Company. In connection with the Recapitalization Transaction, effective as of July 26, 2019, the Company's name was changed from Virtual Crypto Technologies, Inc. to Viewbix Inc.





Reorganization Transaction

On September 19, 2022, the Company consummated the Reorganization Transaction with Gix Media pursuant to which Gix Media Shares were exchanged for shares of the Company's Common Stock, which resulted in Gix Media becoming a wholly owned subsidiary of the Company. Prior to the closing of the Reorganization Transaction, Gix Media was a majority-owned subsidiary of Gix Internet, which held approximately 58% of the Common Stock of the Company, on a fully diluted basis. Following the Reorganization Transaction, holders of the Gix Media Shares held 90% of the Company's Common Stock on a fully diluted basis, with Gix holding 76.67% of the Common Stock on a fully diluted basis.





Cortex Acquisition

On October 13, 2021, Gix Media acquired 70% (on a fully diluted basis) of the share capital of Cortex. In consideration for the Cortex Acquisition, Gix Media paid NIS 35 million in cash (approximately $11 million), out of which an amount of $0.5 million was deposited in trust for a period of 12 months from the closing date. The Cortex Acquisition also includes the obligation (and right) of Gix Media to acquire 30% of Cortex's Remaining Balance Shares, such that following the completion of the acquisition of all the Remaining Balance Shares, Gix Media will hold 100% of Cortex's share capital on a fully diluted basis. In January 2023, the Company acquired an additional 10% of Cortex's share capital.

In connection with the Cortex Acquisition, at the closing date, Gix Media entered into the Financing Agreement with Leumi for the provision of a line of credit in the total amount of up to $3.5 million and a long-term loan totaling $6 million, which Gix Media used to finance the Cortex Acquisition.





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Results of Operations during the year ended December 31, 2022, as compared to the year ended December 31, 2021

Revenues for the year ended December 31, 2022, were $96,603 thousand as compared to $45,224 thousand for the year end December 31, 2021. The reason for the increase during the fiscal year ended December 31, 2022, is due to the Cortex Acquisition on October 13, 2021, therefore, the financial statements of the Company for the year ended December 31, 2022, include Cortex's financial results for the full fiscal year, compared to the financial statements of the Company for the year ended December 31, 2021, which include Cortex's financial results for approximately only two and a half months, since the date of the Cortex Acquisition.

Traffic acquisition and related costs for the year ended December 31, 2022, were $83,011 thousand as compared to $37,442 thousand for the year ended December 31, 2021. The reason for the increase in the year ended December 31, 2022, is due to the inclusion of Cortex's financial results for different periods of time in the financial statements of the Company for the years ended December 31, 2022, and 2021, as explained above.

Research and development costs for the year ended December 31, 2022, was $3,255 thousand as compared to $2,369 thousand for the year ended December 31, 2021. The reason for the increase in the year ended December 31, 2022, is due to the inclusion of Cortex's financial statements.

Sales and marketing expenses for the year ended December 31, 2022, was $2,479 thousand as compared to $1,345 thousand for the year ended December 31, 2021. The reason for the increase in the year ended December 31, 2022, is due to the inclusion of Cortex's financial statements.

General and administration expenses for the year ended December 31, 2022, was $2,157 thousand as compared to $1,384 thousand for the year ended December 31, 2021. The reason for the increase in the year ended December 31, 2022, is due to the inclusion of Cortex's financial statements.

Our depreciation and amortization expenses for the year ended December 31, 2022, were $2,809 thousand, as compared to $1,941 thousand during the same period in the prior year. The reason for the increase, is due to the Company's recording depreciation and amortization expenses in connection with the Cortex Acquisition on October 13, 2021 and the Reorganization Transaction on September 19, 2022, reflecting the historical cost and depreciation expenses of all intangible assets as reflected in the consolidated financial statements of Medigus Ltd. (see Note 1b of our audited and consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K).

Our business acquisition and related costs were $166 thousand for the year ended December 31, 2022, compared to $222 thousand during the year ended December 31, 2021. In the year ended December 31, 2022, the Company's recorded business acquisition and related costs were in connection with the Reorganization Transaction in the year ended December 31, 2021, the Company's business acquisition and related costs were in connection with the Cortex Acquisition.

Our net financial expense was $1,456 thousand for the year ended December 31, 2022, compared to net financial income of $140 thousand for the year ended December 31, 2021. The reason for the increase in financial expenses in the year ended December 31, 2022, is primarily due to financial expenses in connection with the Financing Agreement as part of the Cortex Acquisition on October 13, 2021, the increase of the USD to NIS exchange rate and the increased interest on the Company's bank loans which due to the significant increases in the market's interest rates during the year ended December 31, 2022.

Our tax expenses were $153 thousand for the year ended December 31, 2022, as compared to $90 thousand tax expenses for the year ended December 31, 2021. The reason for the increase in the year ended December 31, 2022, is due to the inclusion of Cortex's financial statements.





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Liquidity and Capital Resources

As of December 31, 2022, we had current assets of $29,841 thousand consisting of $4,196 thousand in cash and cash equivalents, $185 thousand in restricted deposits, $20,945 thousand in accounts receivables, $973 thousand in other current receivables and $3,542 thousand in the loan to our parent company, in accordance with the Second Loan Agreement, as defined below.

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

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

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

As of December 31, 2021, we had current assets of $29,245 thousand consisting of $5,208 thousand in cash and cash equivalents, $234 thousand in restricted deposits, $16,415 thousand in accounts receivables, $1,004 thousand in other receivables and $6,384 thousand in loan to Gix Internet, according to the Second Loan agreement.

As of December 31, 2021, we had non-current assets of $22,016 thousand consisting of $83 thousand in severance pay funds, $133 thousand in deferred taxes, $569 thousand in operating lease right-of-use assets, $334 thousand in property and equipment net, $8,414 thousand in intangible assets, net and $12,483 thousand in goodwill.

As of December 31, 2021, we had $26,796 thousand in current liabilities consisting of $16,676 thousand in accounts payable, $1,317 thousand in other payables, $6,569 thousand in short term loan and current maturities of long-term loan, $91 thousand in operating lease liabilities and a $2,116 thousand in loan from Gix Internet, according to the First Loan agreement, as defined below.

As of December 31, 2021, we had $5,975 thousand in non-current liabilities consisting of $188 thousand in accrued severance pay, $4,270 thousand long-term loan, $491 thousand in operating lease liabilities - long term and $1,026 thousand in deferred taxes.

We had a positive working capital of $1,319 thousand and $2,476 thousand as of December 31, 2022 and December 31, 2021, respectively.

During the fiscal year ended December 31, 2022, we had positive cash flow from operations of $3,237 thousand which was mainly the result of a $1,117 thousand in net income, $3,233 thousand from positive adjustments to operating activities, offset by $1,113 negative changes in assets and liabilities items.

During the fiscal year ended December 31, 2021, we had positive cash flow from operations of $4,366 thousand which was mainly the result of a $591 thousand in net income, $1,406 thousand from positive adjustments to operating activities, and $2,369 positive changes in assets and liabilities items.

During the fiscal year ended December 31, 2022, we had $74 thousand negative cash flow from investing activities as compared to $10,765 thousand negative cash flow from investing activities during the year ended December 31, 2021, which was primarily in connection with the Cortex Acquisition.

During the fiscal year ended December 31, 2022, we had $4,224 thousand negative cash flow from financing activities which was mainly the result of repayment of long-term bank loan in amount of $1,389 thousand, payment of dividend to non-controlling interests in amount of $1,689 thousand and increase in loan to parent company in amount of $1,073 thousand.





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During the fiscal year ended December 31, 2021, we had $8,277 thousand positive cash flow from financing activities which was mainly the result of $9,500 thousand receipt of long-term and short-term bank loans in connection with Cortex Acquisition, offset by repayment of short-term and long-term bank loans in amount of 830$ thousand, payment of dividend to non-controlling interests in amount of $194 thousand and increase in loan to parent company in amount of $199 thousand.

There are no limitations in the Company's Certificate of Incorporation on the Company's ability to borrow funds or raise funds through the issuance of shares of its common stock to affect a business combination.

On December 18, 2020, we entered into a Loan Agreement (the "Loan Agreement") with certain investors pursuant to which the investors lent us an aggregate of $69,000 (the "Principal Amount"). In accordance with the terms of the Loan Agreement, we repaid the interest on the Principal Amount (8% compounded annually) to the investors by issuing 19,715 shares of Common Stock, at a price per share of $0.01. The shares of Common Stock were issued to the investors pursuant to Regulation S of the Securities Act of 1933, as amended. In January 2023 we agreed to repay the outstanding Principal Amount to the investors in three equal monthly payments. As of the date of this Annual Report, we delivered two (2) payments of $23,000 each.

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 all of Gix Media's holdings in Cortex.

The Company has also provided several liens under the Financing Agreement with Leumi in connection with the Cortex Transaction, as follows: (1) a guarantee to Leumi of all of Gix Media's obligations and undertakings to Leumi unlimited in amount; (2) a subordination letter signed by the company to Leumi; (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.

According to the Financing Agreement, Gix Media undertook to meet financial covenants over the life of the loans as follows: (1) the ratio of debt to EBITDA, based on the Gix Media's consolidated financial statements in all 4 consecutive quarters, will not exceed 2.4 in the first two years and will not exceed 1.75 in the following two years. As of December 31, 2022, Gix Media is in compliance with the financial covenants in connection with the Financing Agreement.

Availability of Additional Capital

Our potential financing transactions may include the issuance of equity and/or debt securities including convertible debt, obtaining credit facilities, or other financing mechanisms. In the event that we seek to raise funds through additional private placements of equity or convertible debt, the trading price of our common stock could be adversely affected. Further, any adverse conditions in the financial markets could make it more difficult to obtain future financing through the issuance of equity or debt securities when and if needed. Even if we are able to raise a sufficient amount of funds that may be required, it is possible that we could incur unexpected costs and expenses or experience unexpected cash requirements that would force us to seek additional and/or alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our common stock. If additional financing is not available or is not available on acceptable terms, we may have to curtail our plan of operations.

Critical Accounting Policies and Estimates

Our significant accounting policies are summarized in Note 2 to our consolidated financial statements. We identify here a number of policies that entail significant judgments or estimates by management.

Business Combination - Reorganization Transaction

See Note 1B to out consolidated financial statements.

The Company allocates the purchase price of tangible and intangible assets acquired, and liabilities assumed by the Ultimate Parent as of March 1, 2022, based on estimated fair values, with any residual of the purchase price recorded as goodwill. Third party appraisal firms and other consultants are engaged to assist management in determining the fair values of certain assets acquired and liabilities assumed. Different valuations approaches are used to value different types of intangible assets. The Company primarily uses the income approach in the valuation of intangible assets. The income approach to valuation is based on the present value of future cash flows attributable to each identifiable intangible asset. This approach to valuation requires management to make significant estimates and assumptions including but not limited to: discount rates, future cash flows, technology, and customer relationships. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain.

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