Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations
Management’s
Discussion and Analysis of Financial Condition and Results of Operations analyzes the major elements of our balance sheets, statements
of comprehensive income (loss) and cash flows. This section should be read in conjunction with our 2018 Form 10-K filed with the
SEC and our unaudited interim consolidated financial statements and accompanying notes to these financial statements including
in this form 10-Q. All amounts are in U.S. dollars and rounded to thousands of U.S dollars.
Forward-Looking Statement Notice
This unaudited quarterly
report on Form 10-Q contains forward-looking statements, about our expectations, beliefs or intentions regarding, among other
things, our product development efforts, business, financial condition, results of operations, strategies or prospects. In addition,
from time to time, our representatives have made or may make forward-looking statements, orally or in writing. Forward-looking
statements can be identified by the use of forward-looking words such as “believe,” “expect,” “intend,”
“plan,” “may,” “should” or “anticipate” or their negatives or other variations
of these words or other comparable words or by the fact that these statements do not relate strictly to historical or current
matters. These forward-looking statements may be included in, but are not limited to, various filings made by us with the United
States Securities and Exchange Commission, or the SEC, press releases or oral statements made by or with the approval of one of
our authorized executive officers. Forward-looking statements relate to anticipated or expected events, activities, trends or
results as of the date they are made. Because forward-looking statements relate to matters that have not yet occurred, these statements
are inherently subject to risks and uncertainties that could cause our actual results to differ materially from any future results
expressed or implied by the forward-looking statements. Many factors could cause our actual activities or results to differ materially
from the activities and results anticipated in forward-looking statements, including, but not limited to, those set forth in our
2018 Form 10-K.
This report identifies
important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements,
particularly those set forth under Item 1A. “Risk Factors” as disclosed in our 2018 Form 10-K.
Such risk factors
are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in
any of our forward-looking statements. Given these uncertainties, readers are cautioned not to place undue reliance on such forward-looking
statements.
Factors
that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include,
but are not limited to:
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●
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we have substantial
debt which may adversely affect us by limiting future sources of financing, interfering with our ability to pay interest and
principal on our indebtedness and subjecting us to additional risks;
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●
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we need to raise
additional capital to meet our business requirements in the future, and such capital raising may be costly or difficult to
obtain and will dilute current stockholders’ ownership interests;
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our current pipeline
is based on a single compound known as LO2A (“LO2A”) and on the continuation of our license to commercialize LO2A;
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●
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our inability to
expand our rights under our LO2A License Agreement may have a detrimental effect on our business;
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the initiation,
timing, progress and results of our preclinical studies, clinical trials and other product candidate development efforts;
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our ability to advance
our product candidate into clinical trials or to successfully complete our preclinical studies or clinical trials;
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our receipt of regulatory
approvals for our product candidate, and the timing of other regulatory filings and approvals;
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the clinical development,
commercialization and market acceptance of LO2A;
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our ability to establish
and maintain corporate collaborations;
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the implementation
of our business model and strategic plans for our business and product candidate;
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the scope of protection
we are able to establish and maintain for intellectual property rights covering LO2A and our ability to operate our business
without infringing the intellectual property rights of others;
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our ability to successfully
operate our joint venture together with Cannabics Pharmacueticals, Inc. (“Cannabics”);
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estimates of our
expenses, future revenues, and capital requirements;
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competitive companies,
technologies and our industry; and
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statements as to
the impact of the political and security situation in Israel on our business.
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All forward-looking
statements attributable to us or persons acting on our behalf speak only as of the date of this report and are expressly qualified
in their entirety by the cautionary statements included in this report. We undertake no obligations to update or revise forward-looking
statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events.
In evaluating forward-looking statements, you should consider these risks and uncertainties.
Description of Business
We are a clinical-stage
biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including dry eye syndrome (“DES”).
We have in-licensed certain rights to purchase, market, sell and distribute a formula known as LO2A, a drug developed for
the treatment of DES, and other ophthalmological illnesses, including Conjunctivochalasis (“CCH”) and Sjögren’s
syndrome (“Sjögren’s”).
LO2A is currently
registered and marketed by its inventor in Germany and Switzerland for the treatment of DES, in Hungary for the treatment of DES,
CCH and Sjögren’s and in the Netherlands for the treatment of DES and Sjögren’s.
We intend to focus on marketing
LO2A as a treatment for DES and other ophthalmic inflammations, including CCH and / or Sjögren’s, in the United States
(the “Licensed Territories”), and in additional territories, subject to obtaining the appropriate regulatory file for
each such territory and purchasing the rights to market, sell and distribute LO2A in those additional territories. We believe that
the potential for the most economic success is in marketing LO2A for treating CCH and Sjögren’s. The registration process
in certain countries, including the United States, requires us to conduct additional clinical trials, in addition to the Phase
II clinical trials that we have completed and Phase IV clinical trials that we are currently conducting.
We
plan to engage local or multinational distributors to handle the distribution of LO2A. In particular, we intend to engage, subject
to obtaining the requisite rights in LO2A, pharmaceutical companies or distributors around the world with relevant marketing capabilities
in the pharmaceutical field, in order for such pharmaceutical companies to sell LO2A, with us prioritizing those territories where
we may expedite the registration process of LO2A based on existing knowledge and studies previously conducted on LO2A, without
requiring additional studies.
In
August 2016, we commenced the Multi-Center Trial, which is a Phase II randomized, double-blind, placebo-controlled, clinical trial,
in parallel groups which is intended for the repeated confirmation of the effectiveness and safety of LO2A for patients suffering
from moderate to severe CCH. The trial is a multi-center trial in five different medical centers in Israel with a treatment time
of three months for each patient. All 62 patients have completed their treatment. We believe that we currently have sufficient
funds to complete the Multi-Center Trial by the end of 2018. In November 2018 we received the top line results for the Multi-Center
trial which describe analysis of the primary endpoint, defined as the reduction in Lissamine green conjunctival staining (LGCS)
score from baseline to 3 months. The originally planned primary analysis was based upon recruitment of a sample size of 62 patients.
Analysis was performed on the 49 fully evaluable patients using a mixed model with repeated measures (MMRM) and utilized all post
baseline observations, (1-month and 3-month follow-ups) demonstrating statistical significance between the LO2A group and the
placebo group (P=0.0079). The planned primary endpoint analysis compared average reduction in LGCS score from baseline to three
months. This analysis also demonstrated a strong trend towards significance (P=0.0713) with average reduction in LGCS score between
baseline and 3 months of -3.5 and -1.6 in the LO2A and placebo groups, respectively. We expect the full statistical report to
be published as soon as the statistical results and conclusion are available and approved.
In
March 2018, we commenced a Phase IV Study. The Phase IV Study is a multi-center trial in three different medical centers in Israel
and will evaluate the safety and efficacy of LO2A for symptomatic improvement of DES in 60 adult patients with Sjögren’s.
Enrolled patients will be randomized in a 1:1 ratio to one of two treatment groups, LO2A or Systane ® Ultra UD.
Drops will be administered topically to the eye over a three month period. This Phase IV Study is designed to support our clinical
approval pathway for LO2A for the treatment of DES in patients with Sjögren’s within certain markets including the
U.S., China and Israel.
On
February 7, 2019, we entered into a joint venture agreement with Cannabics, which became effective on March 1, 2019. Pursuant to
the agreement, we agreed to form a new joint venture company for the purpose of researching, developing and administering cannabinoid
formulations to treat ophthalmic conditions across a range of disease and illness categories. The joint venture will pursue therapeutic
pathways with cannabinoids, supported by a growing body of research that we believe indicates cannabinoid-based therapies have
the potential to address significant unmet medical needs in the market. We and Cannabics will initially own 50% of the joint venture.
The initial board of directors of the new company will consist of three members: one Company appointee, one Cannabics appointee
and one industry expert recommended by us and approved by Cannabics. The initial officers of the Company will be our Chairman Noam
Danenberg and Cannabics’ Chief Executive Officer Eyal Barad, who will serve as co-chief executive officers. In connection
with forming the joint venture we issued Cannabics 900,000 shares of our Common Stock and Cannabics issued us 2,263,944 shares
of its common stock. The joint venture currently has no assets or liabilities and has not started conducting any of its planned
operations. As of today, there are no restrictions on the Cannabics shares but our ability to sell these shares is dependent, among
others, on the liquidity and trading volume in the Cannabics shares. On November 13, 2019, we determined to terminate all activities
under the joint venture until such time as the parties jointly determine that no uncertainty remains with respect to U.S. federal
enforcement of the cannabis industry.
We have not generated
any material revenues from operations since our inception and we do not currently expect to generate any significant revenues
for the foreseeable future, primarily because LO2A is still in early clinical stage development in the markets and for the indications
we are currently targeting (DES with CCH and/or Sjögren’s). Our operating expenses have decreased from $2,765,000 in
the nine months ended September 30, 2018 to $2,569,000 for the nine months ended September 30, 2019. We will require significant
additional capital and, assuming we will have sufficient liquidity resources, we anticipate we will incur significantly higher
costs in the foreseeable future, in order to finance our current strategic plans, including the conduct of ongoing and future
clinical trials as well as further research and development.
On September 4, 2019, the
Company entered into an Exclusive License Agreement (the “License Agreement”) with Copernicus Therapeutics, Inc. (“Copernicus”),
a U.S.-based privately held gene therapy company.
According to the
License Agreement, subject to, and effective as of the Closing (as defined below), Copernicus will grant the Company a worldwide
exclusive license, under the non-viral gene therapy technology and patents of Copernicus, to develop, manufacture and otherwise
to commercialize products for the treatment of Choroideremia (“CHM”), with a right of sublicense (subject to the terms
of the License Agreement). CHM is a rare, degenerative, inherited retinal disorder which leads to blindness and currently has no
treatments approved by the U.S. Food and Drug Administration (the “FDA”).
The grant of the license
under the License Agreement and the Company’s obligations to make payments therefor (the “Closing”) is subject
to the satisfaction of certain customary closing conditions, including the completion of a due diligence investigation of Copernicus
and its technology to the Company’s satisfaction by no later than December 3, 2019 (the “Outside Date”).
Under the License Agreement,
the parties also agreed, among other things, that, prior to Closing, they will (i) negotiate and enter into a mutually acceptable
development agreement (the “Development Agreement”), whereby Copernicus will provide development services to the Company
with the aim to complete a Phase 1/2 clinical trial in accordance with a development plan specified in the License Agreement and
(ii) discuss in good faith potential acquisition of Copernicus by the Company or other strategic transactions. The parties also
agreed to discuss in good faith entering into a mutually acceptable manufacturing agreement and may enter into one or more other
ancillary agreements incorporating terms consistent in all material respects with the terms set forth in the License Agreement.
In consideration for the
license, the Company agreed to pay Copernicus (i) an upfront license fee and (ii) tiered royalty payments on net sales (subject
to certain customary reductions) of the licensed products ranging from high single-digit to low double-digit percentages. Subject
to Closing, the Company will also undertake (i) if the Company sublicenses any of the licensed patent rights or technology to a
third party, pay Copernicus a tiered percentage of all non-royalty sublicense revenues received by the Company from the sublicensees,
with the applicable percentage based upon the stage of development of the licensed products at the time the Company enters into
the sublicense, and (ii) to use its good faith efforts to seek a priority review voucher awarded by the FDA to sponsors of a rare
pediatric disease in connection with obtaining marketing approval for the licensed product (the “PPRV”) and, should
the Company sell the PPRV (if any is obtained), to pay Copernicus a portion of the consideration therefor.
As part of the License
Agreement, the Company and Copernicus agreed that the Development Agreement will provide that, in consideration for the development
services in accordance with the development plan, the Company will pay Copernicus (i) development fees designed to fund the performance
of the development plan leading to the completion of the Phase 1/2 clinical study and (ii) development milestone payments that,
if timely achieved, will be payable in shares of the Company’s common stock or in cash, according to the terms of the License
Agreement.
The term of the License
Agreement will continue, on a country-by-country basis, until the later of (i) a certain number of years after first marketing
approval is granted in the applicable jurisdiction with respect to the licensed product and (ii) the date on which the licensed
patents in such jurisdiction expire. However, the License Agreement may be terminated before expiration of its term under certain
customary events, such as an uncured material breach by either party, as well as (i) by either party, in the event that the Closing
shall not have occurred on or before the Outside Date, and (ii) by Copernicus, if the Company shall have not completed, at any
time between the date of the License Agreement and 180 days following the Closing, one or more financings or strategic transactions
resulting in Wize receiving, or having immediate access to, single digit million dollars.
Results of Operations Nine Months
Ended September 30, 2019 Compared to the Nine Months Ended September 30, 2018
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|
Nine Months Ended
September 30,
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2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
(451,000
|
)
|
|
|
(521,000
|
)
|
|
General and administrative
|
|
|
(2,118,000
|
)
|
|
|
(2,244,000
|
)
|
|
Total operating costs
|
|
|
(2,569,000
|
)
|
|
|
(2,765,000
|
)
|
|
Financial income (expense), net
|
|
|
(8,000
|
)
|
|
|
1,277,000
|
|
|
Net loss
|
|
$
|
(2,577,000
|
)
|
|
|
(1,488,000
|
)
|
Revenues
We did not generate
any revenues from operations during the nine months ended September 30, 2019 and 2018. We had no revenues primarily because (1)
from the time of the Creditors’ Arrangement (as defined in our Form 10-K) of Wize Israel in February 2015 until May 2015,
when we (through Wize Israel) entered into the LO2A License Agreement, Wize Israel did not conduct any business operations and
(2) thereafter, currently, Wize Israel is engaged primarily in research and development. Pursuant to the LO2A License Agreement,
Wize Israel is required to pay Resdevco certain royalties for sales in the licensed territories based on an agreed-upon price
per unit of either $0.60, in Israel and Ukraine, or in the low single digits of US Dollars, in the People’s Republic of
China, payable on a semi-annual basis, subject to making certain minimum royalty payments as set forth in the LO2A License Agreement.
In February 2019, the Company and Resdevco agreed that royalties for 20 and 30 unit dose eyedrops shall be the higher of $0.60
or a percentage of revenues, not to exceed 10%, from sales made in the United States and other countries, excluding Israel, China
and Ukraine, and that the Company shall pay Resdevco minimum yearly payments of $150,000 per year through 2021, and then annual
payments of $475,000 per year, and shall pay Resdevco $650,000 within two years after receipt of FDA approval for eye drops utilizing
the licensed technology.
Operating Expenses
Research and development
expenses. Research and development expenses were $451,000 for the nine months ended September 30, 2019, compared to $521,000
for the nine months ended September 30, 2018, a decrease of $70,000 or 13.5%. The decrease in research and development expenses
is primarily related to lower expenses for clinical trials.
General and administrative
expenses. General and administrative expenses were $2,118,000 for the nine months ended September 30, 2019, compared to $2,244,000
for the nine months ended September 30, 2018, a decrease of $126,000 or 5.6%. The decrease in general and administrative expenses
during these periods is primarily related to decrease in share-based payment expense of $183,000 and decrease in professional services
expenses of $400,000 which was partly offset by an increases in investor relations and marketing of $175,000, an increase in payroll
expenses of $105,000, increase in travel expenses of $62,000 and increase in other expenses of $76,000.
Financial income
(expense), Net. Financial expense, net was $8,000 for the nine months ended September 30, 2019 compared to financial income,
net of $1,277,000 for the nine months ended September 30, 2018, a change of $1,285,000 or 100.6%. The decrease in financial income,
net during this period is primarily related to recognition of losses from extinguishments of the convertible loans in the
amount of $878,000, increase in investment revaluation of $270,000 derived from unrealized loss on marketable securities measured
at fair value through earnings and a lower amortization of premium related to convertible loans of $150,000.
Net loss. As
a result of the foregoing, we recognized $2,577,000 of net loss for the nine months ended September 30, 2019 compared to a net
loss of $1,488,000 for the nine months ended September 30, 2018, an increase in the net loss of $1,089,000 or 73.2%.
Results of Operations Three Months
Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018
|
|
|
Three Months Ended
September 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
(230,000
|
)
|
|
|
(222,000
|
)
|
|
General and administrative
|
|
|
(609,000
|
)
|
|
|
(738,000
|
)
|
|
Total operating costs
|
|
|
(839,000
|
)
|
|
|
(960,000
|
)
|
|
Financial income (expense), net
|
|
|
(33,000
|
)
|
|
|
445,000
|
|
|
Net loss
|
|
$
|
(872,000
|
)
|
|
|
(515,000
|
)
|
Operating Expenses
Research and development
expenses. Research and development expenses were $230,000 for the three months ended September 30, 2019, compared to $222,000
for the three months ended September 30, 2018, an increase of $8,000 or 3.6%. The increase in research and development expenses
is mainly from an increase of expenses for clinical trials.
General and administrative
expenses. General and administrative expenses were $609,000 for the three months ended September 30, 2019, compared to $738,000
for the three months ended September 30, 2018, a decrease of $129,000 or 17.5%. The decrease in general and administrative expenses
during these periods is primarily related to decrease in professional services expenses of $279,000 which was partially offset
by an increases in share-based payment expenses of $75,000 and an increase in investor relations and marketing expenses of $55,000.
Financial
income (expense), Net. Financial expense, net was $33,000 for the three months ended September 30, 2019 compared to
financial income, net of $445,000 for the three months ended September 30, 2018, a change of $478,000 or 107.4%. The decrease
in financial income, net during this period is primarily related to the increase in investment revaluation of $104,000
derived from unrealized loss on marketable securities measured at fair value through earnings and a lower amortization of
premium related to convertible loans of $345,000.
Net loss. As
a result of the foregoing, we recognized $872,000 of net loss for the three months ended September 30, 2019 compared to a net
loss of $515,000 for the three months ended September 30, 2018, an increase in the net loss of $357,000 or 69.3%.
Liquidity and Capital Resources
General
Liquidity is the ability
of a company to generate funds to support its current and future operations, satisfy its obligations, and otherwise operate on
an ongoing basis. Significant factors in the management of liquidity are funds generated by operations, levels of accounts receivable
and accounts payable and capital expenditures. Since the court-approved Creditors Arrangement (as defined in our Form 10-K) completed
in February 2015, as described below, we financed our operations primarily through equity and convertible debt financings in private
placements, as described below.
Working Capital
and Cash Flows
As of September 30,
2019 and December 31, 2018, we had $1,444,000 and $3,183,000 in cash and cash equivalents, respectively.
As of September 30,
2019 and December 31, 2018, we had $1,580,000 and $2,635,000, respectively, of outstanding loans, including accrued interest and
net of discounts, all of which relates to convertible loans, as described below. However, the aggregate principal amount of such
loans is $1,353,000 (not including interest).
As of September 30,
2019 and December 31, 2018, we had ($177,000) and $204,000 of working capital (negative working capital), respectively. As of
September 30, 2019, we had an accumulated deficit of $32,759. The decrease in working capital was primarily due current activity.
The following table presents
the major components of net cash flows provided by (used in) operating, investing and financing activities for the periods presented:
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(1,548,000
|
)
|
|
$
|
(1,378,000
|
)
|
|
Net cash provided by investing activities
|
|
$
|
-
|
|
|
$
|
255,000
|
|
|
Net cash provided by (used in) financing activities
|
|
$
|
(150,000
|
)
|
|
$
|
995,000
|
|
Nine Months ended
September 30, 2019 Compared to Nine Months ended September 30, 2018
For the nine months
ended September 30, 2019 and 2018, net cash used in operating activities was $1,548,000 and $1,378,000, respectively. The increase
in net cash used in operating activities of $170,000 was mainly due to an increase in net loss of $1,089,000 and a decrease in
stock-based compensation of $573,000 which was partially offset by losses from convertible loans extinguishments of $878,000,
change in fair value of marketable equity securities of $270,000, change in other current assets of $210,000 and decrease in amortization
of a premium related to convertible loans of $150,000.
For the nine months
ended September 30, 2019 and 2018, net cash provided by investing activities was Nil and $255,000, respectively.
The decrease in net cash provided by investing activities was mainly due to decrease in proceeds from sale of marketable equity
of $257,000 in the nine month period ended September 30, 2018 which we did not have in the nine month period ended September 30,
2019.
For the nine months
ended September 30, 2019 and 2018, net cash provided by (used in) financing activities was $(150,000) and $995,000, respectively.
The decrease in net cash provided by financing activities was mainly due to proceeds from issuance of shares with respect to exercise
of PIPE warrants and right for future investment in the amount of $1,145,000 in 2018. There were no such transactions in 2019.
In addition, in both 2019 and 2018, the Company repaid license purchase obligations of $150,000.
Outlook
According to management
estimates, liquidity resources as of September 30, 2019 may not be sufficient to maintain our planned level of operations for
the next 12 months. In particular, if needed, we may raise additional funding. However, for a long-term solution, we will need
to seek additional capital for the purpose of implementing our business strategy and managing our business and developing drug
candidates. Conducting clinical trials and commercializing products is expensive and we will need to raise substantial additional
funds to achieve our strategic objectives. We have not yet generated any material revenues from our current operations, and therefore
we are dependent upon external sources for financing our operations. We will require significant additional financing in the near
future. Additional financing may not be available on acceptable terms, if at all. Our future capital requirements as well as the
ability to obtain financing will depend on many factors, including those listed under “RISK FACTORS – Risks Related
to our Business,” beginning on page 33 of our 2018 Form 10-K. As of September 30, 2019, we had an accumulated deficit. In
addition, during the years ended December 31, 2018 and 2017, we reported operating losses and negative cash flows from operating
activities. Our management considered the significance of such conditions in relation to our ability to meet our current and future
obligations and determined that such conditions raise substantial doubt about each our ability to continue as a going concern.
As such, the report of our independent registered public accounting firm on the audited financial statements as of and for the
year ended December 31, 2018 included in our Form 10-K contains an emphasis of matter paragraph regarding substantial doubt about
our ability to continue as a going concern. Substantial doubt about our ability to continue as a going concern could materially
limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise. Future reports
on our financial statements may also include an emphasis of matter paragraph with respect to our ability to continue as a going
concern.
We currently have
no agreements, arrangements, or understandings with any person to obtain funds through bank loans, lines of credit, or any other
sources. Until we can generate significant continuing revenues, we expect to satisfy our future cash needs through debt or equity
financings, or by out-licensing our distribution rights. We cannot be certain that additional funding will be available to us
on acceptable terms, or at all. If funds are not available, we may be required to delay, reduce the scope of, or eliminate one
or more of our commercialization efforts.
We are addressing
our liquidity issues by implementing initiatives to raise additional funds as well as other measures that we believe will allow
us to continue as a going concern. Such initiatives may include monetizing of our assets, including the sale of the Can-Fite Bio-Pharma
Ltd. and Cannabics shares that we currently own that are presented as marketable equity securities in our financial statements.
Recent Amendments
to our Loan Agreements. The following is a summary of the recent amendments to our convertible loan agreements.
As of September 30,
2019, we (through Wize Israel) had a total principal and accrued interest balance of approximately $1.51 million of loans outstanding
under certain convertible loans.
The 2016 Loan.
On March 20, 2016, Wize Israel entered into a convertible loan (as amended on March 30, 2016, December 21, 2017, October
19, 2018, March 4, 2019, and May 31, 2019 (the “2016 Loan Agreement”) with Rimon Gold Assets Ltd. (“Rimon Gold”),
whereby Rimon Gold extended a loan in the principal amount of up to NIS 2 million (approximately $531,000, according to exchange
rate of originate date), which bears interest at an annual rate of 4% (the “2016 Loan”).
In addition, under
the 2016 Loan Agreement, as amended to date, Rimon Gold has certain investment rights to purchase securities of Wize Israel, which
later became investment rights to purchase securities of the Company in the Merger.
The 2017 Loan.
On January 15, 2017, Wize Israel entered into the 2017 Loan Agreement (as amended on December 21, 2017, October 19, 2018, March
4, 2019, and May 31, 2019 the “2017 Loan Agreement”) with Ridge Valley Corporation (“Ridge”), and, by
way of entering into assignments and assumption agreements following such date, also with Rimon Gold and Shimshon Fisher (“Fisher”),
whereby each of the lenders extended a loan in the principal amount of up to NIS 1 million (approximately $274,000) and in the
aggregate principal amount of up to NIS 3 million (approximately $822,000), which bears interest at an annual rate of 4%. The
lenders also received certain investment rights to purchase securities of Wize Israel, which later became investment rights to
purchase securities of the Company in the Merger.
March 2019 Loan
Amendment. On March 4, 2019, the Company and its wholly-owned subsidiary Wize Israel entered into an amendment to convertible
loan agreements (the “March 2019 Amendment”) with Rimon Gold, Ridge, and Fisher. Pursuant to the March 2019 Amendment,
the maturity date under the (i) 2016 Loan Agreement, and (ii) the 2017 Loan Agreement was extended to May 31, 2019 from March 4,
2019. The parties also agreed that the lenders’ remaining investment rights under the 2016 Loan Agreement to invest up to
$512.8 thousands, in the aggregate, at $1.308 per share, and the Lender’s remaining investment rights under the 2017 Loan
Agreement to invest up to $663.4 thousands, in the aggregate, at $1.332 per share, be extended from June 30, 2019 to November 30,
2019.
April 2019 Purchase
of Existing Convertible Loans by Chief Executive Officer. In April 2019 our Chief Executive Officer purchased directly from
Ridge all of the outstanding convertible loans held by Ridge in the amount of approximately $279,000 for a total of
265,531 shares of common stock issuable upon conversion of the loans and accompanying investment rights to purchase an additional
94,382 shares of common stock at $1.332 per share.
May
2019 Loan Amendment. On May 31, 2019, the Company and Wize Israel entered into an amendment to convertible loan agreements
(the “May 2019 Amendment”) with Rimon Gold, Mobigo Inc., an entity owned by our Chief Executive Officer, and Fisher.
Pursuant to the May 2019 Amendment, the maturity dates under (i) the 2016 Loan Agreement and (ii) the 2017 Loan Agreement were
extended to November 30, 2019 from May 31, 2019. The parties also agreed that the lenders’ investment rights under the 2016
Loan Agreement to invest up to $512,809, in the aggregate, at $1.308 per share, and the lenders’ investment rights under
the 2017 Loan Agreement to invest up to $663,446, in the aggregate, at $1.332 per share, be extended to May 31, 2021. As consideration
for extending the maturity date of the loans, the Company issued to the lenders two-year warrants to purchase an aggregate of
868,034 shares of common stock at an exercise price of $1.10 per share.
Off-Balance Sheet Arrangements
As of September 30,
2019, we did not have any off-balance sheet arrangements, as such term is defined under Item 303 of Regulation S-K, that have
or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Recently Issued Accounting Pronouncements
For information with
respect to recent accounting pronouncements, see Note 2 to our interim consolidated financial statements as of September 30, 2019 included
in this Form 10-Q.
Critical Accounting Policies
Our critical accounting
policies are described in the notes to our consolidated financial statements as of December 31, 2018 included in our 2018 Form
10-K. There have been no changes to critical accounting policies in the nine month period ended September 30, 2019.