As
filed with the Securities and Exchange Commission on November 21, 2018
Registration No. 333-
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT
UNDER
THE
SECURITIES ACT OF 1933
WIZE
PHARMA, INC.
(Exact
Name of Registrant as Specified in Its Charter)
Delaware
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2834
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80-0445167
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(State
or other jurisdiction of
incorporation or organization)
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(Primary
Standard Industrial
Classification Code Number)
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(I.R.S.
Employer
Identification No.)
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24
Hanagar Street
Hod
Hasharon, Israel
4527708
Telephone:
+972 (72) 260-0536
(Address,
Including Zip Code, and Telephone Number, Including Area Code, of Registrant’s Principal Executive Offices)
Or
Eisenberg
Acting
CEO and CFO
Wize
Pharma, Inc.
24
Hanagar Street
Hod
Hasharon, Israel
4527708
Telephone:
+972 (72) 260-0536
(Name,
address, including zip code, and telephone number,
including area code, of agent for service)
Copies
to:
Ido
Zemach, Adv.
Yoni
Henner, Adv.
Goldfarb
Seligman & Co.
98
Yigal Alon Street
Tel-Aviv
6789141, Israel
Telephone:
+972 (3) 608-9999
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Gregory
Sichenzia, Esq.
Avital
Perlman, Esq.
Sichenzia
Ross Ference LLP
1185
Avenue of the Americas
New
York, NY 10036
Telephone:
(212) 930-9700
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Approximate
date of commencement of proposed sale to the public:
From time to time after the effective date of this registration statement,
as determined by market and other conditions.
If
any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box. ☒
If
this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the
following box and list the Securities Act registration statement number of the earlier effective registration statement for the
same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If
this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
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Large
accelerated filer: ☐
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Accelerated
filer: ☐
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Non-accelerated
filer: ☐
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Smaller
reporting company: ☒
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Emerging
Growth Company: ☒
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If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act
☒
CALCULATION
OF REGISTRATION FEE
Title of each class of
securities to be registered
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Amount To Be Registered
(1)
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Proposed Maximum Offering Price Per Share
(2)
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Proposed Maximum Aggregate Offering Price
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Amount of Registration Fee
(3)
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Common Stock, $0.001 par value
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3,100,000
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$
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2.33
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$
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7,223,000
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$
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875.43
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Common Stock, $0.001 par value, underlying shares of Series A Preferred Stock
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1,350,000
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$
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2.33
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$
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3,145,500
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$
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3,81.23
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Common Stock, $0.001 par value, underlying Warrants
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9,256,000
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$
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2.33
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$
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21,566,480
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$
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2,613.86
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Total:
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13,706,000
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$
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31,934,980
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$
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3,870.52
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(1)
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Pursuant
to Rule 416(a) under the Securities Act of 1933, as amended (the “Securities Act”), there
are also being registered hereby an additional indeterminate number of shares of the Registrant’s Common Stock,
$0.001 par value (the “Common Stock”) as may become issuable to the selling
stockholders as a result of stock splits, stock dividends and similar transactions, and, in any such event, the number of
shares registered hereby shall be automatically increased to cover the additional shares.
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(2)
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Estimated
in accordance with Rule 457(c) under the Securities Act, solely for the purpose of calculating the registration fee, based
on the average of the high and low closing prices of our Common Stock on November 19, 2018, as reported on the
OTCQB.
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(3)
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Determined
in accordance with Section 6(b) of the Securities Act at a rate equal to $121.20 per $1,000,000 of the proposed maximum aggregate
offering price.
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THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL
THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
The
information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration
statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell
nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject
to completion. Dated November 21, 2018.
PRELIMINARY
PROSPECTUS
13,706,000
SHARES OF COMMON STOCK
This
prospectus relates to the offering and resale by the selling stockholders identified herein of up to 13,706,000 shares of Common
Stock issued or issuable to such selling stockholders in connection with a private placement completed on October 24, 2018, including:
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3,100,000
issued and outstanding shares of Common Stock;
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1,350,000
shares of Common Stock issuable upon conversion of Series A Preferred Stock;
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4,450,000
shares of Common Stock issuable upon exercise of Series A Warrants;
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4,450,000
shares of Common Stock issuable upon exercise of Series B Warrants;
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267,000
shares of Common Stock issuable upon exercise of placement agent warrants (the “Placement Agent Warrants”); and
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89,000
shares of Common Stock issuable upon exercise of advisor warrants (the “Advisor Warrants” and, together with the Series
A Warrants, the Series B Warrants and the Placement Agent Warrants, the “2018 Warrants”).
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We
will not receive any proceeds from the sale of these shares by the selling stockholders.
Upon
the exercise of the Warrants for an aggregate of 9,256,000 shares of Common Stock by payment of cash however, we will receive
the exercise price of the Warrants, or an aggregate of approximately $9,709,900.
The
selling stockholders may sell all or a portion of the shares of Common Stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters, broker-dealers or agents. Please see the section entitled “PLAN
OF DISTRIBUTION” on page 95 of this prospectus for more information. For more information about the private placement, please
see the section entitled “
October 2018 Private Placement”
on page 90
of this prospectus. For a list of the selling stockholders, see the section entitled “SELLING STOCKHOLDERS” on page
91 of this prospectus.
We will bear all fees and expenses incident to our obligation to register the shares of Common Stock.
Our Common Stock is quoted on the OTCQB
under the symbol “WIZP.” On November 20, 2018, the closing price per share of our Common Stock as quoted on the OTCQB
was $2.29 per share.
We
may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the
entire prospectus and any amendments or supplements carefully before you make your investment decision.
We
are an “emerging growth company” as defined under the federal securities laws, and, as such, are eligible for reduced
public company reporting requirements. See “PROSPECTUS SUMMARY—Implications of Being an Emerging Growth Company”
on page
1
of this prospectus.
Investing
in our Common Stock involves risks. You should carefully read the “RISK FACTORS” beginning on page 5
of
this prospectus before investing.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is ____________ __, 2018.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
You
should rely only on the information contained in this prospectus or contained in any prospectus supplement or free writing prospectus
filed with the Securities and Exchange Commission (the “SEC”). Neither we nor the selling stockholders have authorized
anyone to provide you with additional information or information different from that contained in this prospectus filed with the
SEC. The selling stockholders are offering to sell, and seeking offers to buy, shares of our Common Stock only in jurisdictions
where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of shares of our Common Stock. Our business, financial condition,
results of operations and prospects may have changed since that date.
For
investors outside the United States: Neither we nor the selling stockholders have done anything that would permit this offering
or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in
the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about,
and observe any restrictions relating to, the offering of the shares of Common Stock and the distribution of this prospectus outside
the United States.
As
used in this prospectus, , unless otherwise designated, the terms “we,” “us,” “our,” the “Company,”
“Wize” and “our company” refer to Wize Pharma, Inc. (formerly known as OphthaliX, Inc.), a Delaware corporation,
and its wholly-owned Israeli subsidiary, Wize Pharma Ltd. (“Wize Israel”).
All
dollar amounts refer to U.S. dollars unless otherwise indicated.
Unless
derived from Wize’s financial statements or otherwise indicated, U.S. dollar translations of New Israeli Shekels (“NIS”)
amounts presented in this report are translated using the rate of NIS 3.683 to one U.S. dollar, the exchange rate reported by
the Bank of Israel for November 9, 2018.
On
March 5, 2018, we effected a reverse stock split of our Common Stock at a ratio of one for twenty-four (1:24) (the “Reverse
Stock Split”). Unless otherwise indicated, all share and per share amounts included in this prospectus reflect the effects
of the Reverse Stock Split.
Wize
Pharma, Inc.
®
, the Wize logo and other trademarks or service marks of Wize appearing in this prospectus are the
property of Wize or its subsidiaries. Trade names, trademarks and service marks of other companies appearing in this prospectus
are the property of their respective holders.
PROSPECTUS
SUMMARY
This
summary highlights information contained elsewhere in this prospectus. Before making an investment decision, you should read the
entire prospectus carefully, including the sections entitled “RISK FACTORS,” beginning on page 5
and
“CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS,” beginning on page 28.
About
Wize
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 (“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 and CCH and in the Netherlands for the treatment of DES and Sjögren’s.
We
intend to market LO2A as a treatment for DES and other ophthalmic inflammations, including CCH and Sjögren’s in
the United States, Israel, the People’s Republic of China (“China”) and Ukraine (collectively, the
“Licensed Territories”), the territories that we have licensed LO2A, and in additional territories, subject to
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. Currently, we have a distribution
agreement for marketing in Israel, where LO2A is approved for the treatment of DES only, a distribution agreement for
marketing in Ukraine, where LO2A is in the approval process for the treatment of DES, and a distribution agreement for
distribution in China, where the evaluation and preparation for the registration process commenced in December 2017 by HPGC
Medical Co., Ltd., our distributor in China (the “Chinese Distributor”). 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 the 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 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 (the “Multi-Center Trial”) with
a treatment time of three months for each patient. All the 62 patients have completed their treatment. 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.
On
October 26, 2017, Wize Israel announced the termination of its single-center trial in Israel that commenced in January 2017 (“Single
Center Trial”). The Single Center Trial was a Phase II, randomized, double-blind, placebo-controlled, pilot study carried
out in parallel groups that was intended to evaluate the safety and efficacy of LO2A for patients suffering from moderate to severe
CCH with Wize Israel having sole access to the trial data. On October 24, 2017, Wize Israel received notice from the contract
research organization (the “CRO”) that manages and supervises Wize Israel’s clinical trials, that an inadequate
amount of quality information may be derived from the results collected thus far, given that there is no correlation in the reaction
of both eyes to LO2A, in contrast to professional literature and other trials. In addition, the recruitment rate of patients was
less than required and there was a higher than expected dropout rate. In light of the above, the CRO concluded that the results
of the trial would be of no use even if the trial continued until the end of its term. Based on the CRO’s conclusion, Wize
Israel determined to terminate the trial and to save the future costs that would be incurred in connection with such trial.
In
March 2018, we commenced a Phase IV study, which is a randomized, double-masked, study of LO2A versus Alcon’s Systane
®
Ultra UD, an over-the-counter lubricant eye drop product used to relieve dry and irritated eyes (the “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, Ukraine and Israel. We
believe that we currently have sufficient funds to complete the Phase IV Study.
On
May 21, 2017, we entered into an Agreement and Plan of Merger (as amended, the “Merger Agreement”), with Bufiduck
Ltd., a company formed under the laws of the State of Israel and our wholly owned subsidiary (“Merger Sub”) and Wize
Israel, which contemplated the merger of Merger Sub with and into Wize Israel, with Wize Israel continuing as the surviving entity
and becoming our wholly owned subsidiary (the “Merger”). On October 31, 2017, Merger Sub, Wize Israel and us entered
into an amendment to the Merger Agreement which extended the expiration date of the Merger Agreement until November 30, 2017.
On November 16, 2017 (the “Closing Date”), we were renamed “Wize Pharma, Inc.,” and completed the Merger.
Prior to the Merger, we had no active business and were a “shell company” as such term is defined in Rule 12b-2 under
the Securities Exchange Act of 1934, as amended (the “Exchange Act”). As a result of the Merger, we have ceased to
be a “shell company” and the business of Wize Israel became the ongoing business of Wize.
The
Merger was accounted for as a reverse recapitalization of us by Wize Israel. Under reverse recapitalization accounting, our assets
and liabilities were recorded, as of the completion of the Merger, at their historical amounts. Consequently, the annual consolidated
financial information of Wize Israel for the year ended December 31, 2017 and the consolidated quarterly financial information
of Wize Israel for the quarter ended September 30, 2018 reflects the operations of the acquirer for accounting purposes together
with a deemed issuance of shares, equivalent to the shares held by the former stockholders of the legal acquirer and a recapitalization
of the equity of the accounting acquirer. The annual consolidated financial information of Wize Pharma, Inc. for the year ended
December 31, 2017 and the consolidated financial information of Wize Pharma, Inc. for the quarter ended September 30, 2018, includes
the accounts of Wize Israel since inception and our accounts since the effective date of the reverse recapitalization.
On
March 5, 2018, we effected the Reverse Stock Split.
Corporate
Information
Our
Common Stock offered in this prospectus is quoted on the OTCQB under the symbol “WIZP.”
Our
principal executive offices are located at 24 Hanagar Street, Hod Hasharon, Israel, and our telephone number is +972 (72) 260-0536.
Our website is http://www.wizepharma.com.
The information on our website is not incorporated
by reference into this prospectus.
Implications
of Being an Emerging Growth Company
We
qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS
Act. As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise
applicable generally to public companies. These provisions include:
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a
requirement to provide only two years of audited financial statements in addition to any required unaudited interim financial
statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results
of Operations” disclosure;
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reduced
disclosure about executive compensation arrangements;
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no
non-binding advisory votes on executive compensation or golden parachute arrangements; and
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an
exemption from the auditor attestation requirement in the assessment of internal control over financial reporting.
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We
may take advantage of these provisions for up to five years or such earlier time that we are no longer an emerging growth company.
We would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which
we had total annual gross revenues of $1.07 billion or more; (ii) the last day of our fiscal year following the fifth anniversary
of the date of the completion of our initial public offering; (iii) the date on which we had issued more than $1 billion in nonconvertible
debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer under the rules
of the SEC.
To
the extent that we continue to qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under
the Exchange Act, after we cease to qualify as an emerging growth company, certain of the exemptions available to us as an emerging
growth company may continue to be available to us as a smaller reporting company, including: (1) not being required to comply
with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures;
and (3) the requirement to provide only two years of audited financial statements, instead of three years.
THE
OFFERING
Issuer
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Wize
Pharma, Inc.
24
Hanagar Street
Hod
Hasharon 452770, Israel
Telephone:
+972 (72) 260-0536
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Securities
Offered by the Selling Stockholders
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13,706,000
shares of our Common Stock, including (i) 3,100,000 issued and outstanding shares of Common Stock, (ii) 1,350,000 shares of
Common Stock issuable upon conversion of Series A Preferred Stock, (iii) 4,450,000 shares of Common Stock issuable upon exercise
of Series A Warrants, (iv) 4,450,000 shares of Common Stock issuable upon exercise of Series B Warrants, (v) 267,000 shares
of Common Stock issuable upon exercise of the Placement Agent Warrants and (vi) 89,000 shares of Common Stock issuable upon
exercise of the Advisor Warrants.
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Trading
Market
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The
Common Stock offered in this prospectus is quoted on the OTCQB under the symbol “WIZP.” In the future, we intend
to seek to have our Common Stock listed on a national securities exchange. However, we may not be successful in having our
shares listed on a national securities exchange.
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Common
Stock Outstanding Before this Offering
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8,462,550
shares
1
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Common
Stock Outstanding After this Offering
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19,068,550
shares
2
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Use
of Proceeds
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We
will not receive any of the proceeds from the sale of the shares of our Common Stock being offered for sale by the selling
stockholders. Upon the exercise of the 2018 Warrants for an aggregate of 9,256,000 shares of Common Stock by payment of cash
however, we will receive the exercise price of the 2018 Warrants, or an aggregate of approximately $9,709,900.
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Plan
of Distribution
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The
selling stockholders may sell all or a portion of the shares of Common Stock beneficially owned by them and offered hereby
from time to time directly or through one or more underwriters, broker-dealers or agents. Registration of the Common Stock
covered by this prospectus does not mean, however, that such shares necessarily will be offered or sold. See
“Plan
of Distribution.”
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Risk
Factors
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Please
read
“Risk Factors”
and other information included in this prospectus for a discussion of factors you should
carefully consider before deciding to invest in the securities offered in this prospectus.
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1
The number of shares of Common Stock shown above to be outstanding before this offering is based on 8,462,550 shares outstanding
as of November 20, 2018, which number includes 131,200 shares of Common Stock which were issued upon the vesting of restricted
share units (“RSUs”) that were granted by us on April 4, 2018 and excludes as of November 20, 2018:
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1,350,000
shares of Common Stock issuable upon the conversion of the Series A Preferred
Stock;
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4,450,000
shares of Common Stock issuable upon the exercise of the Series A Warrants;
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4,450,000
shares of Common Stock issuable upon the exercise of the Series B Warrants;
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267,000
shares of Common Stock issuable upon the exercise of the Placement Agent Warrants;
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89,000
shares of Common Stock issuable upon the exercise of the Advisor Warrants;
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1,399,290
shares of Common Stock issuable upon the conversion of Convertible Loans (as
defined below);
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890,138
shares of Common Stock issuable upon the exercise of the Investment Rights (as
defined below) under the Convertible Loans;
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759,871
shares of Common Stock issuable upon the exercise of the 2017 Warrants (as defined below);
and
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stock
options to purchase an aggregate of 259,896 shares of Common Stock, with the latest expiration date of these options being
August 15, 2028 (of which, options to purchase 64,390 shares of Common Stock were exercisable within 60 days of November 20,
2018).
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2
The number of shares of Common Stock shown above to be outstanding after this offering is based on 8,462,550 shares outstanding
as of November 20, 2018 and assumes (i) the conversion of the Series A Preferred Stock into 1,350,000 shares of Common Stock,
(ii) the exercise of the Series A Warrants into an aggregate of 4,450,000 shares of Common Stock, (iii) the exercise of the Series
B Warrants into an aggregate of 4,450,000 shares of Common Stock, (iv) the exercise of the Placement Agent Warrants into 267,000
shares of Common Stock, and (v) the exercise of the Advisor Warrants into 89,000 shares of Common Stock and excludes as of that
date all other shares of Common Stock issuable upon (i) conversion of the Convertible Loans, (ii) exercise of Investment Rights,
(iii) exercise of the 2017 Warrants and (iv) exercise of stock options.
RISK
FACTORS
An
investment in our securities involves a high degree of risk. You should consider carefully the following information about these
risks, together with the other information contained in this prospectus, including the matters addressed in the section entitled
“CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS,” beginning on page 28
of this prospectus,
before making an investment decision. Our business, prospects, financial condition, and results of operations may be materially
and adversely affected as a result of any of the following risks. The value of our securities could decline as a result of any
of these risks. You could lose all or part of your investment in our securities. Some of the statements in “RISK FACTORS”
are forward-looking statements. The following risk factors are not the only risk factors facing our company. Additional risks
and uncertainties not presently known to us or that we currently deem immaterial may also affect our business, prospects, financial
condition, and results of operations and it is not possible to predict all risk factors, nor can we assess the impact of all factors
on us or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained
in or implied by any forward-looking statements.
Risks
Related to our Business
We
have incurred operating losses since our inception and anticipate that we will continue to incur substantial operating losses
for the foreseeable future.
We
are a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including DES. We have
in-licensed certain rights to LO2A, a drug developed for the treatment of DES, and other ophthalmological illnesses, including
CCH and Sjögren’s. Since April 2015, we have been financing our operations through numerous financing activities, including
the issuance of ordinary shares and from loans from Ridge Valley Corporation (“Ridge”) and Rimon Gold Assets Ltd.
(“Rimon Gold”) and from third parties. We have historically incurred net losses, including net losses of approximately
$2.97 million, $1.1 million and $1.48 million for the years ended December 31, 2017 and 2016 and for the nine months ended September
30, 2018, respectively. At September 30, 2018, we had an accumulated deficit of approximately $27.9 million. We do not know whether
or when we will become profitable. To date, we have not commercialized any products or generated any revenues from product sales
and accordingly we do not have a revenue stream to support our cost structure. Our losses have resulted principally from costs
incurred in development and discovery activities as well as from certain financial expenses related mainly to convertible loans.
We expect to continue to incur losses for the foreseeable future, and these losses will likely increase as we:
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initiate
and manage pre-clinical development and clinical trials for LO2A;
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seek
regulatory approvals for LO2A;
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implement
internal systems and infrastructures;
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seek
to license additional technologies to develop;
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pay
royalties and other payments related to an Exclusive Distribution and Licensing Agreement with Resdevco Ltd. (“Resdevco”),
dated as of May 1, 2015, as amended and supplemented thereafter (the “LO2A License Agreement”);
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hire
management and other personnel; and
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move
towards commercialization.
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No
certainty exists that we will be able to complete the development of LO2A for CCH, Sjögren’s or any other ophthalmic
disorder, due to financial, technological or other difficulties. If LO2A fails in clinical trials or does not gain regulatory
clearance or approval, or if LO2A does not achieve market acceptance, we may never become profitable. Even if we do achieve profitability,
we may not be able to sustain or increase profitability on a quarterly or annual basis. Our inability to achieve and then maintain
profitability would negatively affect our business, financial condition, results of operations and cash flows. Moreover, our prospects
must be considered in light of the risks and uncertainties encountered by an early-stage company and in highly regulated and competitive
markets, such as the biopharmaceutical market, where regulatory approval and market acceptance of our products are uncertain.
There can be no assurance that our efforts will ultimately be successful or result in revenues or profits.
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 the Convertible Loans and subjecting us to additional risks.
We
have a significant amount of indebtedness. As of September 30, 2018, we had a total of $1,455,920 of loans (principal and interest)
outstanding under Convertible Loans, of which (1) Ridge extended a principal amount of $274,048, (2) Rimon Gold extended a principal
amount of $805,115, and (3) Shimshon Fisher (“Fisher”) extended a principal amount of $274,048. If we incur additional
indebtedness to our current indebtedness levels, including other short or long-term credit facilities, the related risks that
we now face could increase. For more information relating to the Convertible Loans and the agreements relating thereto, please
see “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” beginning on page
64 of this prospectus.
Our
substantial debt could have important consequences, including:
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making
it more difficult for us to satisfy our obligations with respect to the Convertible Loans and other obligations;
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limiting
our ability to obtain additional financing on satisfactory terms and to otherwise fund working capital, capital expenditures,
and other general corporate requirements;
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our
ability to adjust to changing market conditions;
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increasing
our vulnerability to general adverse economic and industry conditions;
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placing
us at a competitive disadvantage compared to our competitors that have no debt or are less leveraged;
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limiting
our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and
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restricting
us from making strategic acquisitions or exploiting business opportunities.
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Our
assets are subject to security interests in favor of Rimon Gold. Our failure to repay the Convertible Loans, if required, could
result in legal action against us, which could require the sale of all of our assets.
In
order to secure our obligations and performance pursuant to the Convertible Loans from Rimon Gold, we recorded a first priority
fixed charge in favor of Rimon Gold on all of our rights, including our distribution rights, under the LO2A License Agreement,
and a first priority floating charge on all of our rights, title and interest in all of our assets, as exist from time to time.
If we are unable to repay the Convertible Loans from Rimon Gold when due, Rimon Gold could foreclose on our assets in order to
recover the amounts due. Any such action would require us to curtail or cease operations.
The
Convertible Loans contain restrictive covenants that may limit our corporate activities, which could have an adverse effect on
our financial condition and results of operations.
We
delivered to Rimon Gold an Irrevocable Guaranty and Undertaking (the “Wize Guaranty”) pursuant to which we irrevocably
guarantee Wize Israel’s obligations to Rimon Gold under the Convertible Loans. The Wize Guaranty contains a number of restrictive
covenants that limit our operating flexibility. Furthermore, the Convertible Loans (including the Security Agreements associated
therewith) contain a number of undertakings and restrictive covenants that, until the full repayment of such loans (including
by way of conversion into our shares), limit our operating and financial flexibility. The covenants in the Convertible Loans (including
the Security Agreements associated therewith) and the Wize Guaranty include, among other things, limitations on the creations
of liens; on the incurrence of indebtedness; on dispositions of assets, mergers, acquisitions and change of control transactions;
on changes in the general nature of our business; and on the distribution of dividends. Such obligations may hinder our future
operations or the manner in which we operate our business, which could have a material adverse effect on our business, financial
condition or results of operations. These restrictions could also limit our ability to plan for or react to market conditions
or meet extraordinary capital needs or otherwise restrict corporate activities. These provisions, when taken as a whole, may also
have the effect of making an acquisition of us more difficult and, consequently, also cause our shares to trade at prices below
the price for which third parties might be willing to pay to gain control of us.
As
a result of the restrictions in the Convertible Loans (including the Security Agreements associated therewith) and the Wize Guaranty,
or similar restrictions in our future financing arrangements, we may need to seek permission from our lenders in order to engage
in certain corporate actions. Our lenders’ interests may be different from ours and we may not be able to obtain their permission
when needed or at all. This may prevent us from taking actions that we believe are in our best interest, which may adversely impact
our revenues, results of operations and financial condition.
We
will 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.
The
sources of financing at our disposal are estimated by our management to be currently insufficient (i) to conduct our ongoing business
for the next 12 months, (ii) to conduct any future clinical trials, and (iii) for LO2A’s commercial production and marketing.
No certainty exists that we will be able to secure the additional sources of finance we need to perform the advanced and necessary
stages of receiving regulatory approvals for marketing and distributing our products, including the costs derived from performing
clinical trials and the requirements of the regulatory authorities. The lack of satisfactory means of financing may bring our
business activity to a halt. As of September 30, 2018, we had cash and cash equivalents of approximately $0.1 million. We have
expended and believe that we will continue to expend substantial resources for the foreseeable future developing LO2A. These expenditures
will include costs associated with research and development, manufacturing, conducting clinical trials, as well as commercializing
any products approved for sale. Because the outcome of our planned and anticipated clinical trials is highly uncertain, we cannot
reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of LO2A. In addition,
other unanticipated costs may arise. As a result of these and other factors currently unknown to us, we will require additional
funds, through public or private equity or debt financings or other sources, such as strategic partnerships and alliances and
licensing arrangements. In addition, we may seek additional capital due to favorable market conditions or strategic considerations
even if we believe we have sufficient funds for our current or future operating plans.
Our
future capital requirements will depend on many factors, including the progress and results of our clinical trials, the duration
and cost of discovery and preclinical development, and laboratory testing and clinical trials of LO2A, the timing and outcome
of regulatory review of LO2A, the number and development requirements of other product candidates that we pursue, if any, and
the costs of activities, such as product marketing, sales, and distribution. Because of the numerous risks and uncertainties associated
with the development and commercialization of LO2A, we are unable to estimate the amounts of increased capital outlays and operating
expenditures associated with our anticipated clinical trials.
Our
future capital requirements depend on many factors, including:
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the
need to service debt obligations under the Convertible Loans;
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any
payments to be made to Resdevco under the LO2A License Agreement;
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the
failure to obtain regulatory approval or achieve commercial success of LO2A;
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the
results of our preclinical studies and clinical trials for any future earlier stage product candidate, and any decisions to
initiate clinical trials if supported by the preclinical results;
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the
costs, timing and outcome of regulatory review of LO2A that progress to clinical trials;
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the
costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our issued patents and defending
intellectual property-related claims;
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the
cost of commercialization activities if any LO2A is approved for sale for a particular indication, including marketing, sales
and distribution costs;
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the
cost of manufacturing LO2A;
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the
timing, receipt and amount of sales of, or royalties on, our future products, if any;
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the
expenses needed to attract and retain skilled personnel;
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any
product liability or other lawsuits related to our products;
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the
extent to which we acquire or invest in businesses, products or technologies and other strategic relationships; and
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the
costs of financing unanticipated working capital requirements and responding to competitive pressures.
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Additional
funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available
to us on a timely basis, we may be required to delay, limit, reduce or terminate preclinical studies, clinical trials or other
research and development activities for LO2A or delay, limit, reduce or terminate our establishment of sales and marketing capabilities
or other activities that may be necessary to commercialize LO2A.
We
may incur substantial costs in pursuing future capital financing, including investment banking fees, legal fees, accounting fees,
securities law compliance fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash
expenses in connection with certain securities we issue, such as convertible notes and warrants, which may adversely impact our
financial condition.
According
to management estimates, liquidity resources as of September 30, 2018, as adjusted for the proceeds from our October 2018 private
placement may not be sufficient to maintain our operations for the next twelve months which raises substantial doubt regarding
our ability to continue as a going concern. If we do not continue as a going concern, investors could lose their entire investment.
According
to management estimates, liquidity resources as of September 30, 2018, as adjusted for the proceeds from our October 2018 private
placement, may not be sufficient to maintain our operations for the next 12 months. Our inability to raise funds to conduct our
research and development activities may have a severe negative impact on our ability to remain a viable company. These conditions
raise substantial doubt about our ability to continue as a going concern. As such, the report of our independent registered public
accounting firm on our audited financial statements as of and for the year ended December 31, 2017 contains an emphasis of matter
paragraph regarding substantial doubt about our ability to continue as a going concern. This emphasis of matter paragraph could
materially limit our ability to raise additional funds through the issuance of debt or equity securities or otherwise. Future
reports on our annual financial statements may include an emphasis of matter paragraph with respect to our ability to continue
as a going concern.
If
we fail to obtain necessary funds for our operations, we will be unable to maintain and improve our licensed technology, and we
will be unable to develop and commercialize LO2A.
Our
present and future capital requirements depend on many factors, including:
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the
level of research and development investment required to develop LO2A;
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the
costs of obtaining or manufacturing LO2A for research and development and testing;
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the
results of preclinical and clinical testing, which can be unpredictable in drug development;
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changes
in drug development plans needed to address any difficulties that may arise in manufacturing, preclinical activities or clinical
studies;
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our
ability and willingness to enter into new agreements with strategic partners and the terms of these agreements;
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our
success rate in preclinical and clinical efforts associated with milestones and royalties;
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the
costs of investigating patents that might block us from developing potential product candidates;
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the
costs of recruiting and retaining qualified personnel;
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the
time and costs involved in obtaining regulatory approvals;
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the
costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and
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our
need or decision to acquire or license complementary technologies or new platform or product candidate targets.
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If
we are unable to obtain the funds necessary for our operations, we will be unable to maintain and improve our licensed technology,
and we will be unable to develop and commercialize our products and technologies, which would materially and adversely affect
our business, liquidity and results of operations.
Potential
administrative enforcement proceedings may have an adverse effect on our business and financial condition.
To
our knowledge, the ISA is conducting an administrative inquiry regarding Wize Israel’s public reports with the ISA in
Israel regarding its applicable regulatory path necessary for the marketing of LO2A for the treatment of DES in the United
States. As part of the inquiry, the ISA requested Wize Israel to provide certain documentation and has also questioned its
officers with respect to such reports. Wize Israel and its officers cooperated with the ISA and, at the ISA’s request,
Wize Israel also publicly filed a supplemental report to provide additional information in connection with the said
regulatory path and marketing plans, which we believe contained all the required information.
In
October 2018, the Company was informed that the ISA intends to commence administrative enforcement proceedings against Wize
Israel, the Company’s former Chairman and the Company’s Chief Executive Officer in connection with the foregoing
reports, pending a hearing with the ISA staff. The hearing with the ISA staff was recently held and the ISA is expected to
inform the Company in the near future whether it intends to pursue such administrative enforcement proceedings.
As of
the date of this prospectus, it is uncertain whether such inquiry will lead to any administrative enforcement proceedings by
the ISA, if at all. In the event the ISA commences enforcement proceedings against Wize Israel or its office holders, this
could result, among other things, in financial sanctions against Wize Israel or its office holders, which can adversely
effect our business and financial condition.
Risks
Related to our Business and Regulatory Matters
We
have not yet commercialized LO2A, and may never become profitable.
Although
LO2A is approved for sale for certain indications in a limited number of jurisdictions, we have not yet commenced commercialization
of LO2A, and may never be able to do so other than with respect to the entry into of distribution agreements in Israel and Ukraine,
which are not expected to result in material revenues. Our activity is influenced by the policies of regulatory authorities. Changes
and developments in regulatory requirements or our failure to meet such requirements may lead to restrictions or delays in developing
LO2A and cause material expenses for us. We do not know when or if we will complete any of our product development efforts of
LO2A, obtain regulatory approval for any future product candidates incorporating our technologies or successfully commercialize
any approved products. Even if we are successful in developing LO2A that is approved for marketing, we will not be successful
unless these products gain market acceptance for appropriate indications at favorable reimbursement rates. The degree of market
acceptance of these products will depend on a number of factors, including:
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the
timing of regulatory approvals in the countries, and for the uses, we seek;
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the
competitive environment;
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the
establishment and demonstration in the medical community of the safety and clinical efficacy of LO2A and its potential advantages
over existing therapeutic products;
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our
ability to enter into strategic agreements with pharmaceutical and biotechnology companies with strong marketing and sales
capabilities;
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the
adequacy and success of distribution, sales and marketing efforts; and
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the
pricing and reimbursement policies of government and third-party payors, such as insurance companies, health maintenance organizations
and other plan administrators.
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Physicians,
patients, thirty-party payors or the medical community in general may be unwilling to accept, utilize or recommend, and in the
case of third-party payors, cover any of our products or products incorporating our technologies. As a result, we are unable to
predict the extent of future losses or the time required to achieve profitability, if at all. Even if we successfully develop
one or more products that incorporate our technologies, we may not become profitable.
Our
current pipeline is based on a single compound, LO2A. Failure to develop LO2A will have a material adverse effect on us.
In
August 2016, we commenced the Multi-Center Trial. As of March 26, 2018, the Multi-Center Trial had already enrolled all the planned
62 patients, with the treatment time for each patient being three months. On October 26, 2017, Wize Israel announced the termination
of the Single Center Trial. In March 2018, we enrolled our first patient in the Phase IV Study. We currently do not have sufficient
funds to complete the Phase IV Study.
LO2A
is at various stages of clinical development and may never be commercialized for the indications in the territories that we presently
have rights under the LO2A License Agreement. The progress and results of any future clinical trials are uncertain, and the failure
of LO2A to receive regulatory approvals will have a material adverse effect on our business, operating results and financial condition
to the extent we are unable to commercialize LO2A. In addition, we face the risks of failure inherent in developing therapeutic
products.
Furthermore,
LO2A must satisfy rigorous standards of safety and efficacy before it can be approved by the U.S. Food and Drug Administration
(the “FDA”), and any applicable foreign regulatory authorities for commercial use. The FDA and foreign regulatory
authorities have full discretion over this approval process. We will need to conduct significant additional research, involving
testing in animals and in humans, before we can file applications for product approval. Typically, in the pharmaceutical industry,
there is a high rate of attrition for product candidates in pre-clinical testing and clinical trials. Also, satisfying regulatory
requirements typically takes many years, is dependent upon the type, complexity and novelty of the product and requires the expenditure
of substantial resources. In addition, delays or rejections may be encountered based upon additional government regulation, including
any changes in FDA policy, during the process of product development, clinical trials and regulatory reviews.
In
order to receive FDA approval or approval from foreign regulatory authorities to market a product candidate, we must demonstrate
through pre-clinical testing and through human clinical trials that the product candidate is safe and effective for its intended
uses (
e.g.
, treatment of a specific condition in a specific way subject to contradictions and other limitations). Even
if we comply with all FDA requests, the FDA may ultimately reject one or more of our new drug applications (“NDA”)
or grant approval for a narrowly intended use that is not commercially feasible. We might not obtain regulatory approval for LO2A
in a timely manner, if at all. Failure to obtain FDA approval for LO2A in a timely manner or at all will severely undermine our
business by reducing the number of salable products and, therefore, corresponding product revenues.
Results
of earlier clinical trials may not be predictive of the results of later-stage clinical trials.
The
results of preclinical studies and early clinical trials of product candidates may not be predictive of the results of later-stage
clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy results
despite having progressed through preclinical studies and initial clinical trials. Many companies in the pharmaceutical industry
have suffered significant setbacks in advanced clinical trials due to adverse safety profiles or lack of efficacy, notwithstanding
promising results in earlier studies. Any delay in, or termination or suspension of, our clinical trials will delay the requisite
filings with the FDA or any applicable foreign regulatory authority and, ultimately, our ability to commercialize LO2A and generate
product revenues. If the clinical trials do not support our product claims, the completion of development of such product candidates
may be significantly delayed or abandoned, which will significantly impair our ability to generate product revenues and will materially
adversely affect our results of operations.
This
drug candidate development risk is heightened by any changes in the planned clinical trials compared to the completed clinical
trials. As product candidates are developed from preclinical through early to late stage clinical trials towards approval and
commercialization, it is customary that various aspects of the development program, such as manufacturing and methods of administration,
are altered along the way in an effort to optimize processes and results. While these types of changes are common and are intended
to optimize the product candidates for late stage clinical trials, approval and commercialization, such changes do carry the risk
that they will not achieve these intended objectives.
Changes
in our clinical trials or future clinical trials could cause LO2A or any future product candidate to perform differently, including
causing toxicities, which could delay completion of our clinical trials, delay approval of our product candidates, and/or jeopardize
our ability to commence product sales and generate revenues.
We
might be unable to develop LO2A that will achieve commercial success in a timely and cost-effective manner, or ever.
Even
if regulatory authorities approve LO2A for the indications in the territories that we presently have rights under the LO2A License
Agreement, they may not be commercially successful. LO2A may not be commercially successful because government agencies and other
third-party payors may not cover the product or the coverage may be too limited to be commercially successful; physicians and
others may not use or recommend our products, even following regulatory approval. A product approval, assuming one issues, may
limit the uses for which the product may be distributed thereby adversely affecting the commercial viability of the product. Third
parties may develop superior products or have proprietary rights that preclude us from marketing our products. Patient acceptance
of and demand for LO2A for which we obtain regulatory approval or license will depend largely on many factors, including but not
limited to the extent, if any, of reimbursement of costs by government agencies and other third-party payors, pricing, the effectiveness
of our marketing and distribution efforts, the safety and effectiveness of alternative products, and the prevalence and severity
of side effects associated with our products. If physicians, government agencies and other third-party payors do not accept our
products, we will not be able to generate significant revenue.
Clinical
trials are very expensive, time-consuming and difficult to design and implement, and, as a result, we may suffer delays or suspensions
in future trials which would have a material adverse effect on our ability to generate revenues.
Human
clinical trials are very expensive and difficult to design and implement, in part because they are subject to rigorous regulatory
requirements. Regulatory authorities, such as the FDA, may preclude clinical trials from proceeding. Additionally, the clinical
trial process is time-consuming, failure can occur at any stage of the trials, and we may encounter problems that cause us to
abandon or repeat clinical trials.
For
example, in October 2017, we terminated our Single Center Trial. The Single Center Trial was a Phase II, randomized, double-blind,
placebo-controlled, pilot study carried out in parallel groups that was intended to evaluate the safety and efficacy of LO2A for
patients suffering from moderate to severe CCH, with Wize Israel having sole access to the trial data. On October 24, 2017, Wize
Israel received notice from the CRO that manages and supervises Wize Israel’s clinical trials, that an inadequate amount
of quality information may be derived from the results collected thus far, given that there is no correlation in the reaction
of both eyes to LO2A, in contrast to professional literature and other trials. In addition, the recruitment rate of patients was
less than required and there was a higher than expected dropout rate. In light of the above, the CRO concluded that the results
of the trial would be of no use even if the trial continued until the end of its term. Based on the CRO’s conclusion, Wize
Israel determined to terminate the trial and to save the future costs that would be incurred in connection with such trial. For
the avoidance of doubt, this does not impact the Multi-Center Trial.
The
commencement and completion of clinical trials may be delayed by several factors, including:
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unforeseen
safety issues;
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determination
of dosing issues;
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lack
of effectiveness or efficacy during clinical trials;
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failure
of third party suppliers to perform final manufacturing steps for the drug substance;
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slower
than expected rates of patient recruitment and enrollment;
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lack
of healthy volunteers and patients to conduct trials;
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inability
to monitor patients adequately during or after treatment;
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failure
of third party contract research organizations to properly implement or monitor the clinical trial protocols;
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failure
of institutional review boards to approve our clinical trial protocols;
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inability
or unwillingness of medical investigators and institutional review boards to follow our clinical trial protocols; and
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lack
of sufficient funding to finance the clinical trials.
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We
have experienced the risks involved with conducting clinical trials, including but not limited to, increased expense and delay
and failure to meet end points of the trial.
In
addition, we or regulatory authorities may suspend our clinical trials at any time if it appears that we are exposing participants
to unacceptable health risks or if the regulatory authorities find deficiencies in our regulatory submissions or the conduct of
these trials. Any suspension of clinical trials will delay possible regulatory approval, if any, and adversely impact our ability
to develop products and generate revenue.
If
we acquire or license additional technology or product candidates, we may incur a number of costs, may have integration difficulties
and may experience other risks that could harm our business and results of operations.
We
may acquire and license additional product candidates and technologies. Any product candidate or technology we license from others
or acquire will likely require additional development efforts prior to commercial sale, including extensive pre-clinical or clinical
testing, or both, and approval by the FDA and applicable foreign regulatory authorities, if any. All product candidates are prone
to risks of failure inherent in pharmaceutical product development, including the possibility that the product candidate or product
developed based on licensed technology will not be shown to be sufficiently safe and effective for approval by regulatory authorities.
In addition, we cannot assure you that any product candidate that we develop based on acquired or licensed technology that is
granted regulatory approval will be manufactured or produced economically, successfully commercialized or widely accepted in the
marketplace. Moreover, integrating any newly acquired product candidates could be expensive and time-consuming. If we cannot effectively
manage these aspects of our business strategy, our business may not succeed.
If
any third party upon whom we rely to manufacture LO2A is unable to timely manufacture LO2A in compliance with current Good Manufacturing
Practices (“cGMP”) and other regulations our business will be harmed.
We
do not currently have the ability to manufacture the compounds that we need to conduct our clinical trials and, therefore, rely
upon, and intend to continue to rely upon, a certain contract manufacturer to produce and supply LO2A (including the active pharmaceutical
ingredients, or APIs) for use in clinical trials and for future sales. If such manufacturer is unable to manufacture the compounds
in a timely fashion or in compliance with current cGMP and other applicable regulations or if there is a strain on the relationship
with such manufacturer, our clinical development programs may be delayed which could have a detrimental effect on our business.
The
manufacture of LO2A is a chemical synthesis process and if our manufacturer encounters problems manufacturing LO2A, our business
could suffer.
Regulators
throughout the world, including the FDA, require manufacturers to register manufacturing facilities. Such regulators also inspect
these facilities to confirm compliance with requirements that such regulators establish. We have engaged a contract manufacturer
to produce and supply LO2A and such third party manufacturer may face manufacturing or quality control problems causing product
production and shipment delays or a situation where such manufacturer may not be able to maintain compliance with the applicable
regulators’ requirements necessary to continue manufacturing LO2A. In addition, drug manufacturers may be subject to ongoing
periodic unannounced inspections by regulators to ensure strict compliance with requirements and other regulations and applicable
standards. Any failure to comply with such requirements could adversely affect our clinical research activities and our ability
to market and develop LO2A.
We
do not currently have sales, marketing or distribution capabilities or experience, and are unable to effectively sell, market
or distribute LO2A now and do not expect to be able to do so in the future. The failure to enter into agreements with third parties
that are capable of performing these functions would have a material adverse effect on our business and results of operations.
We
intend to enter into agreements with pharmaceutical companies and distributors with relevant marketing capabilities in the field
of pharmaceuticals in order to use them to sell LO2A in countries around the world where we hold rights to sell LO2A. To date,
we have entered into two distribution agreements and one additional framework agreement to market LO2A for DES only. We do not
currently have and do not expect to develop our own sales, marketing and distribution capabilities. If we are unable to enter
into agreements with third parties to perform these functions, we will not be able to successfully market LO2A. In order to successfully
market LO2A, we must make arrangements with third parties to perform these services.
As
we do not intend to develop a marketing and sales force with technical expertise and supporting distribution capabilities, we
will be unable to market LO2A directly. To promote any of our potential products through third parties, we will have to locate
acceptable third parties for these functions and enter into agreements with them on acceptable terms, and may not be able to do
so. Any third-party arrangements we are able to enter into may result in lower revenues than we could achieve by directly marketing
and selling our potential products. In addition, to the extent that we depend on third parties for marketing and distribution,
any revenues we receive will depend upon the efforts of such third parties, as well as the terms of our agreements with such third
parties, which cannot be predicted in most cases at this time. As a result, we might not be able to market and sell LO2A in the
United States or overseas, which would have a material adverse effect on our business.
We
face significant competition and continuous technological change, and developments by competitors may render our products or technologies
obsolete or non-competitive. If we cannot successfully compete with new or existing products, our marketing and sales will suffer
and may not ever be profitable.
We
are active in a competitive market. The fierce competition in the field and the introduction of new competitors to the field may
negatively impact our monetary results. We will compete against fully integrated pharmaceutical and biotechnology companies and
smaller companies that are collaborating with larger pharmaceutical companies, academic institutions, government agencies and
other public and private research organizations. In addition, many of these competitors, either alone or together with their collaborative
partners, operate larger research and development programs than ours, and have substantially greater financial resources, as well
as significantly greater experience in:
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undertaking
pre-clinical testing and human clinical trials;
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obtaining
FDA, addressing various regulatory matters and other regulatory approvals of drugs;
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formulating
and manufacturing drugs; and
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launching,
marketing and selling drugs.
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If
our competitors develop and commercialize products faster, or develop and commercialize products that are superior to LO2A, our
commercial opportunities will be reduced or eliminated. The extent to which LO2A achieves market acceptance will depend on competitive
factors, many of which are beyond our control. Competition in the biotechnology and biopharmaceutical industry is intense and
has been accentuated by the rapid pace of technology development. Our competitors include large integrated pharmaceutical companies,
biotechnology companies that currently have drug and target discovery efforts, universities, and public and private research institutions.
Almost all of these entities have substantially greater research and development capabilities and financial, scientific, manufacturing,
marketing and sales resources than us. These organizations also compete with us to:
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attract
parties for acquisitions, joint ventures or other collaborations;
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license
proprietary technology that is competitive with the technology we are developing;
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attract
and hire scientific talent and other qualified personnel.
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Our
competitors may succeed in developing and commercializing products earlier and obtaining regulatory approvals from the FDA and
other foreign regulatory authorities more rapidly. Our competitors may also develop products or technologies that are superior
to those we are developing, and render LO2A or any future product candidate or technology obsolete or non-competitive. If we cannot
successfully compete with new or existing products, our marketing and sales will suffer and may never be profitable.
We
may suffer losses from product liability claims if LO2A causes harm to patients.
LO2A
could cause adverse events. There is also a risk that certain adverse events may not be observed in clinical trials, but may nonetheless
occur in the future. If any of these adverse events occur, they may render LO2A ineffective or harmful in some patients, and our
sales would suffer, materially adversely affecting our business, financial condition and results of operations.
The
clinical trials we carry out are with an insurance policy that allows the trials to be conducted. Accordingly, it is uncertain
whether we will be able to complete our receipt of the regulatory approvals for marketing the drug. Furthermore, it is uncertain
whether indemnification will be provided by the insurance companies. In addition, potential adverse events caused by LO2A could
lead to product liability lawsuits. If product liability lawsuits are successfully brought against us, we may incur substantial
liabilities and may be required to limit the marketing and commercialization of LO2A. Our business is exposed to potential product
liability risks, which are inherent in the testing, manufacturing, marketing and sale of pharmaceutical products. We may not be
able to avoid product liability claims. Product liability insurance for the pharmaceutical and biotechnology industries is generally
expensive, if available at all. If, at any time, we are unable to obtain sufficient insurance coverage on reasonable terms or
to otherwise protect against potential product liability claims, we may be unable to clinically test, market or commercialize
LO2A. A successful product liability claim brought against us in excess of our insurance coverage, if any, may cause us to incur
substantial liabilities, and, as a result, our business, liquidity and results of operations would be materially adversely affected.
LO2A
will remain subject to ongoing regulatory requirements even if it receives marketing approval, and if we fail to comply with these
requirements, we could lose these approvals, and the sales of any approved commercial products could be suspended.
Even
if we receive regulatory approval to market LO2A, the product will remain subject to extensive regulatory requirements, including
requirements relating to manufacturing, labeling, packaging, adverse event reporting, storage, advertising, promotion, distribution
and recordkeeping. Even if regulatory approval of a product is granted, the approval may be subject to limitations on the uses
for which the product may be marketed or the conditions of approval, or may contain requirements for costly post-marketing testing
and surveillance to monitor the safety or efficacy of the product, which could negatively impact us or our collaboration partners
by reducing revenues or increasing expenses, and cause the approved product candidate not to be commercially viable. In addition,
as clinical experience with a drug expands after approval, typically because it is used by a greater number and more diverse group
of patients after approval than during clinical trials, side effects and other problems may be observed after approval that were
not seen or anticipated during pre-approval clinical trials or other studies. Any adverse effects observed after the approval
and marketing of a product candidate could result in limitations on the use of or withdrawal of any approved products from the
marketplace. Absence of long-term safety data may also limit the approved uses of our products, if any. If we fail to comply with
the regulatory requirements of the FDA and other applicable U.S. and foreign regulatory authorities, or previously unknown problems
with any approved commercial products, manufacturers or manufacturing processes are discovered, we could be subject to administrative
or judicially imposed sanctions or other setbacks, including the following:
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restrictions
on the products, manufacturers or manufacturing process;
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civil
or criminal penalties, fines and injunctions;
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product
seizures or detentions;
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import
or export bans or restrictions;
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voluntary
or mandatory product recalls and related publicity requirements;
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suspension
or withdrawal of regulatory approvals;
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total
or partial suspension of production; and
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refusal
to approve pending applications for marketing approval of new products or supplements to approved applications.
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If
we or our collaborators are slow or unable to adapt to changes in existing regulatory requirements or adoption of new regulatory
requirements or policies, marketing approval for LO2A may be lost or cease to be achievable, resulting in decreased revenue from
milestones, product sales or royalties, which would have a material adverse effect on our results of operations.
We
rely significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including
any cybersecurity incidents, could harm our ability to operate our business effectively.
Despite
the implementation of security measures, our internal computer systems and those of third parties with which we contract are vulnerable
to damage from cyber-attacks, computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and
electrical failures. System failures, accidents or security breaches could cause interruptions in our operations, and could result
in a material disruption of our clinical activities and business operations, in addition to possibly requiring substantial expenditures
of resources to remedy. The loss of clinical trial data could result in delays in our regulatory approval efforts and significantly
increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a
loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could
incur liability and our research and development programs and the development of LO2A could be delayed.
We
may encounter difficulties in managing our growth. Failure to manage our growth effectively will have a material adverse effect
on our business, results of operations and financial condition.
We
may not be able to successfully grow and expand. Successful implementation of our business plan will require management of growth,
including potentially rapid and substantial growth, which will result in an increase in the level of responsibility for management
personnel and place a strain on our human and capital resources. To manage growth effectively, we will be required to continue
to implement and improve our operating and financial systems and controls to expand, train and manage our employee base. Our ability
to manage our operations and growth effectively requires us to continue to expend funds to enhance our operational, financial
and management controls, reporting systems and procedures and to attract and retain sufficient numbers of talented personnel.
If we are unable to scale up and implement improvements to our control systems in an efficient or timely manner, or if we encounter
deficiencies in existing systems and controls, then we will not be able to make available the products required to successfully
commercialize our technology. Failure to attract and retain sufficient numbers of talented personnel will further strain our human
resources and could impede our growth or result in ineffective growth. Moreover, the management, systems and controls currently
in place or to be implemented may not be adequate for such growth, and the steps taken to hire personnel and to improve such systems
and controls might not be sufficient. If we are unable to manage our growth effectively, it will have a material adverse effect
on our business, results of operations and financial condition.
If
we are unable to obtain adequate insurance, our financial condition could be adversely affected in the event of uninsured or inadequately
insured loss or damage. Our ability to effectively recruit and retain qualified officers and directors could also be adversely
affected if we experience difficulty in obtaining adequate directors’ and officers’ liability insurance.
We
may not be able to obtain insurance policies on terms affordable that would adequately insure our business and property against
damage, loss or claims by third parties. To the extent our business or property suffers any damages, losses or claims by third
parties, which are not covered or adequately covered by insurance, our financial condition may be materially adversely affected.
We
may be unable to maintain sufficient insurance as a public company to cover liability claims made against our officers and directors.
If we are unable to adequately insure our officers and directors, we may not be able to retain or recruit qualified officers and
directors to manage our business.
Risks
Related to our Intellectual Property
Our
ability to pursue the purchase, marketing, sale and distribution of LO2A depends upon the continuation of the LO2A License Agreement.
We
do not own LO2A. We have entered into the LO2A License Agreement with Resdevco to license certain rights to LO2A (see the section
entitled “BUSINESS — LO2A License Agreement,” beginning on page 31
of
this prospectus). The LO2A License Agreement requires us to, among other things, make certain minimum royalty payments to Resdevco
and meet certain regulatory milestones. If we do not meet our obligations under the LO2A License Agreement in a timely manner,
or if we otherwise breach the terms of the LO2A License Agreement, Resdevco could terminate the LO2A License Agreement and we
would lose the rights to LO2A. From time to time, in the ordinary course of business, we may have disagreements with Resdevco
regarding the terms of the LO2A License Agreement or ownership of proprietary rights, which could lead to delays in the research,
development, collaboration and commercialization of LO2A, or could require or result in litigation or arbitration, which could
be time-consuming and expensive. If the LO2A License Agreement is terminated, it would have a material adverse effect on our business,
prospects and results of operations.
Our
inability to expand our rights under the LO2A License Agreement may have a detrimental effect on our business.
Pursuant
to the LO2A License Agreement, we have (i) the right to add additional territories in the future, subject to a commitment by us
to pay minimum royalties, (ii) the right to purchase Resdevco’s agreements with its existing distributors of LO2A in other
jurisdictions, subject to the payment by us of the amount set forth in the LO2A License Agreement, and (iii) a right of first
negotiation with potential distributors to whom Resdevco may in the future grant distribution rights to LO2A in certain territories,
subject to the payment by us of certain minimum royalties. The LO2A License Agreement historically included an option for us to
purchase from Resdevco all remaining territories for a fixed amount and such option was cancelled on March 30, 2017.
Our
ability to exercise our rights mentioned above and to expand our business is subject to us having sufficient cash resources to
make the applicable payments to Resdevco. If we do not have sufficient cash resources to make such payments, we will not be able
to exercise our expansion rights under the LO2A License Agreement and our business may suffer.
The
failure to obtain or maintain patents and other intellectual property could impact our ability to compete effectively.
Our
success, competitive position, and future revenues, if any, depend in part on our ability to obtain and successfully leverage
intellectual property covering LO2A, know-how, methods, processes, and other technologies, to protect our trade secrets, to prevent
others from using our intellectual property and to operate without infringing the intellectual property rights of third parties.
The
risks and uncertainties that we face with respect to our intellectual property rights include, but are not limited to, the following:
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while
any patents that we license under the LO2A License Agreement have been issued, their scope of protection is limited to the
CCH indication in the United States;
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we
may not obtain rights from Resdevco to any further patents or patent applications related to LO2A;
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we
or Resdevco may be subject to interference proceedings;
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we
or Resdevco may be subject to opposition proceedings in foreign countries;
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any
patent that is issued may not provide meaningful protection;
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we
or Resdevco may not be able to develop additional proprietary technologies that are patentable;
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other
companies may challenge patents licensed or issued to us or our customers;
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other
companies may independently develop similar or alternative technologies, or duplicate our technologies;
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other
companies may design around technologies we have licensed or developed; and
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enforcement
of patents is complex, uncertain and expensive.
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If
patent rights covering LO2A are not sufficiently broad or expire, they may not provide us with any protection against competitors
with similar products and technologies. For example, a patent covering the composition and use of LO2A for treating or alleviating
DES has expired. Furthermore, if the United States Patent and Trademark Office (the “USPTO”), or foreign patent offices
issue patents to us or our licensors, others may challenge the patents or design around the patents, or the patent office or the
courts may invalidate the patents. Thus, any patents we own or license from or to third parties may not provide any protection
against our competitors.
We
cannot be certain that patents will be issued as a result of any pending applications, and cannot be certain that any of our issued
patents, including those licensed from Resdevco or any other third-party in the future, will give us adequate protection from
competing products. For example, issued patents, including the patents licensed by us, may be circumvented or challenged, declared
invalid or unenforceable, or narrowed in scope.
In
addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, we cannot
be certain that we or Resdevco were or will be the first to make our inventions or to file patent applications covering those
inventions.
It
is also possible that others may obtain issued patents that could prevent us from commercializing LO2A or require us to obtain
licenses requiring the payment of significant fees or royalties in order to enable us to conduct our business. As to those patents
that we have licensed, our rights depend on maintaining our obligations to the licensor under the applicable license agreement,
and we may be unable to do so.
In
addition to patents and patent applications, we depend upon trade secrets and proprietary know-how to protect our proprietary
technology. We require our employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit
the disclosure of confidential information to any other parties. We require our employees and consultants to disclose and assign
their ideas, developments, discoveries and inventions to us. These agreements may not, however, provide adequate protection for
our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure.
Costly
litigation may be necessary to protect our or Resdevco’s intellectual property rights and we or Resdevco may be subject
to claims alleging the violation of the intellectual property rights of others.
Our
activity in the field of life sciences exposes us to the possibility of legal proceedings connected with our business activities.
We may face significant expense and liability as a result of litigation or other proceedings relating to patents and other intellectual
property rights of others. In the event that another party has also filed a patent application or been issued a patent relating
to an invention or technology claimed by us or Resdevco in pending applications, we may be required to participate in an interference
proceeding declared by the USPTO to determine priority of invention, which could result in substantial uncertainties and costs
for us, even if the eventual outcome was favorable to us. We, or our licensors, could be required to participate in interference
proceedings involving issued patents and pending applications of another entity. An adverse outcome in an interference proceeding
could require us to cease using the technology or to license rights from prevailing third parties.
The
cost to us of any patent litigation or other proceeding relating to our licensed patents or patent applications, even if resolved
in our favor, could be substantial. The ability of us and Resdevco to enforce our patent protection could be limited by our financial
resources, and may be subject to lengthy delays. If we are unable to effectively enforce our or Resdevco’s proprietary rights,
or if we are found to infringe the rights of others, we may be in breach of the LO2A License Agreement.
A
third party may claim that we or Resdevco are using inventions claimed by their patents and may go to court to stop us or Resdevco
from engaging in our normal operations and activities, such as research, development and the sale of any future products. Such
lawsuits are expensive and would consume time and other resources. There is a risk that the court will decide that we or Resdevco
are infringing the third party’s patents and will order us or Resdevco to stop the activities claimed by the patents, redesign
our products or processes to avoid infringement or obtain licenses (which may not be available on commercially reasonable terms).
In addition, there is a risk that a court will order us to pay the other party damages for having infringed their patents.
Moreover,
there is no guarantee that any prevailing patent owner would offer us or Resdevco a license so that we or Resdevco could continue
to engage in activities claimed by the patent, or that such a license, if made available, could be acquired on commercially acceptable
terms. In addition, third parties may, in the future, assert other intellectual property infringement claims against us or Resdevco
with respect to its product candidates, technologies or other matters.
We
rely on our and Resdevco’s confidentiality agreements that could be breached and may be difficult to enforce, which could
result in third parties using our intellectual property to compete against us.
Although
we believe that we take reasonable steps to protect our intellectual property, including the use of agreements relating to the
non-disclosure of confidential information to third parties, as well as agreements that purport to require the disclosure and
assignment of the rights to the ideas, developments, discoveries and inventions of our employees and consultants while they are
employed by us and we believe that Resdevco also takes such measures, the agreements can be difficult and costly to enforce. Although
we believe that our licensors seek to obtain these types of agreements from our contractors, consultants, advisors and research
collaborators, to the extent that employees and consultants utilize or independently develop intellectual property in connection
with any of our projects, disputes may arise as to the intellectual property rights associated with our products. If a dispute
arises, a court may determine that the right belongs to a third party. In addition, enforcement of our and Resdevco’s rights
can be costly and unpredictable. We and Resdevco also rely on trade secrets and proprietary know-how that we believe that Resdevco
seeks to protect in part by confidentiality agreements with employees, contractors, consultants, advisors or others. Despite the
protective measures we and Resdevco employ, we still face the risk that:
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these
agreements may be breached;
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these
agreements may not provide adequate remedies for the applicable type of breach;
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our
and Resdevco’s trade secrets or proprietary know-how will otherwise become known; or
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our
competitors will independently develop similar technology or proprietary information.
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Patent
protection outside the United States is particularly uncertain, and if we are involved in opposition proceedings outside the United
States, we may have to expend substantial sums and management resources.
Patent
law outside the United States is different than in the United States. Further, the laws of some foreign countries may not protect
our or Resdevco’s intellectual property rights to the same extent as the laws of the United States, if at all. A failure
to obtain sufficient intellectual property protection in any country could materially and adversely affect our business, results
of operations and future prospects. Moreover, we may participate in opposition proceedings to determine the validity of our foreign
patents or our competitors’ foreign patents, which could result in substantial costs and divert management’s resources
and attention.
We
may not be able to enforce employees’ and consultants covenants not to compete and therefore may be unable to prevent our
competitors from benefiting from the expertise of some of our former employees or consultants.
We
have entered into non-competition agreements with our key employees and key consultants, within the framework of their employment
agreements or consultant agreements, respectively. These agreements prohibit such persons, if they cease working for us, from
competing directly with us or working for our competitors for a limited period. Under applicable law, we may be unable to enforce
these agreements. If we cannot enforce our non-competition agreements with such persons, then we may be unable to prevent our
competitors from benefiting from the expertise of our former employees and consultants, which could materially adversely affect
our business, results of operations and ability to capitalize on our proprietary information.
Intellectual
property rights do not necessarily address all potential threats to our competitive advantage.
The
degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have
limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples
are illustrative:
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Others
may be able to make compounds that are the same as or similar to LO2A but that are not covered by the claims of the patents
that we have exclusively licensed;
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Resdevco
or any future strategic partners might not have been the first to make the inventions covered by the issued patent or pending
patent applications that we have exclusively licensed;
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Resdevco
or any future strategic partners might not have been the first to file patent applications covering certain of our technology;
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Others
may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our
intellectual property rights;
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It
is possible that any pending patent applications will not lead to issued patents;
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Issued
patents that we have exclusively licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable,
as a result of legal challenges by our competitors;
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Our
competitors might conduct research and development activities in countries where we do not have patent rights and then use
the information learned from such activities to develop competitive products for sale in our major commercial markets;
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We
may not develop additional proprietary technologies that are patentable; and
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The
patents of others may have an adverse effect on our business.
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We
may be subject to claims challenging the inventorship of our patents and other intellectual property.
We
may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other
intellectual property as an inventor or co-inventor. For example, we may have inventorship disputes arise from conflicting obligations
of consultants or others who are involved in developing our product candidates. Litigation may be necessary to defend against
these and other claims challenging inventorship. If we fail in defending any such claims, in addition to paying monetary damages,
we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.
Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims,
litigation could result in substantial costs and be a distraction to management and other employees.
Risks
Related to our Industry
We
are subject to government regulations and we may experience delays in obtaining required regulatory approvals to market LO2A.
Various
aspects of our operations are subject to federal, state or local laws, rules and regulations, any of which may change from time
to time. Costs arising out of any regulatory developments could be time-consuming and expensive and could divert management resources
and attention and, consequently, could adversely affect our business operations and financial performance.
Delays
in regulatory approval, limitations in regulatory approval and withdrawals of regulatory approval may have a material adverse
effect on us. If we experience significant delays in testing or receiving approvals or sign-offs to conduct clinical trials, our
product development costs, or our ability to license LO2A, will increase. If certain country’s regulatory authority grants
regulatory approval to market a product, this approval will be limited to those disease states and conditions for which the product
has demonstrated, through clinical trials, to be safe and effective. Any product approvals that we receive in the future could
also include significant restrictions on the use or marketing of our products. Product approvals, if granted, can be withdrawn
for failure to comply with regulatory requirements or upon the occurrence of adverse events following commercial introduction
of the products. Failure to comply with applicable regulatory requirements may result in criminal prosecution, civil penalties,
recall or seizure of products, total or partial suspension of production or injunction, as well as other regulatory action against
us or LO2A. If approval is withdrawn for a product, or if a product were seized or recalled, we would be unable to sell or license
that product and our revenues would suffer.
We
expect the healthcare industry to face increased limitations on reimbursement as a result of healthcare reform, which could adversely
affect third-party coverage of our products and how much or under what circumstances healthcare providers will prescribe or administer
our products.
In
both the United States and other countries, sales of our products will depend in part upon the availability of reimbursement from
third-party payors, which include governmental authorities, managed care organizations and other private health insurers. Third-party
payors are increasingly challenging the price and examining the cost effectiveness of medical products and services.
Increasing
expenditures for healthcare have been the subject of considerable public attention in the United States. Both private and government
entities are seeking ways to reduce or contain healthcare costs. Numerous proposals that would effect changes in the U.S. healthcare
system have been introduced or proposed in Congress and in some state legislatures, including reducing reimbursement for prescription
products and reducing the levels at which consumers and healthcare providers are reimbursed for purchases of pharmaceutical products.
In
2010, the United States Congress enacted the Patient Protection and Affordable Care Act of 2010 or, Affordable Care Act. The Affordable
Care Act seeks to reduce the federal deficit and the rate of growth in health care spending through, among other things, stronger
prevention and wellness measures, increased access to primary care, changes in health care delivery systems and the creation of
health insurance exchanges. Enrollment in the health insurance exchanges began in October 2013. The Affordable Care Act requires
the pharmaceutical industry to share in the costs of reform, by, among other things, increasing Medicaid rebates and expanding
Medicaid rebates to cover Medicaid managed care programs. Other components of healthcare reform include funding of pharmaceutical
costs for Medicare patients in excess of the prescription drug coverage limit and below the catastrophic coverage threshold. Under
the Affordable Care Act, pharmaceutical companies are now obligated to fund 50% of the patient obligation for branded prescription
pharmaceuticals in this gap, or “donut hole.” Additionally, commencing in 2011, an excise tax was levied against certain
branded pharmaceutical products. The tax is specified by statute to be approximately $3 billion in 2012 through 2016, $3.5 billion
in 2017, $4.2 billion in 2018, and $2.8 billion each year thereafter. The tax is to be apportioned to qualifying pharmaceutical
companies based on an allocation of their governmental programs as a portion of total pharmaceutical government programs.
Although
we cannot predict the full effect on our business of the implementation of existing legislation, including the Affordable Care
Act or the enactment of additional legislation, we believe that legislation or regulations that reduce reimbursement for or restrict
coverage of our products could adversely affect how much or under what circumstances healthcare providers will prescribe or administer
our products. This could materially and adversely affect our business by reducing our ability to generate revenue, raise capital,
obtain additional collaborators and market our products. In addition, we believe the increasing emphasis on managed care in the
United States has and will continue to put pressure on the price and usage of pharmaceutical products, which may adversely impact
product sales.
We
may be subject to U.S. and foreign anti-kickback laws and regulations. Our failure to comply with these laws and regulations could
have adverse consequences.
There
are extensive U.S. federal and state laws and regulations prohibiting fraud and abuse in the healthcare industry that can result
in significant criminal and civil penalties. These federal laws include: the anti-kickback statute, which prohibits certain business
practices and relationships, including the payment or receipt of remuneration for the referral of patients whose care will be
paid by Medicare or other federal healthcare programs; the physician self-referral prohibition, commonly referred to as the Stark
Law; the anti-inducement law, which prohibits providers from offering anything to a Medicare or Medicaid beneficiary to induce
that beneficiary to use items or services covered by either program; the False Claims Act, which prohibits any person from knowingly
presenting or causing to be presented false or fraudulent claims for payment by the federal government, including the Medicare
and Medicaid programs; and the Civil Monetary Penalties Law, which authorizes the U.S. Department of Health and Human Services
to impose civil penalties administratively for fraudulent or abusive acts.
Sanctions
for violating these federal laws include criminal and civil penalties that range from punitive sanctions, damage assessments,
money penalties, imprisonment, denial of Medicare and Medicaid payments, or exclusion from the Medicare and Medicaid programs,
or both, and debarment. As federal and state budget pressures continue, federal and state administrative agencies may also continue
to escalate investigation and enforcement efforts to root out waste and to control fraud and abuse in governmental healthcare
programs. Private enforcement of healthcare fraud has also increased, due in large part to amendments to the civil False Claims
Act in 1986 that were designed to encourage private persons to sue on behalf of the government. A violation of any of these federal
and state fraud and abuse laws and regulations or any similar law in a different jurisdiction which is applicable to us could
have a material adverse effect on our liquidity and financial condition. An investigation into the use by physicians of any of
our products once commercialized may dissuade physicians from either purchasing or using them, and could have a material adverse
effect on our ability to commercialize those products.
Risks
Related to Our Common Stock
The
failure of our business to succeed may result in the depression in the value of our Common Stock.
While
LO2A is approved for sale in certain jurisdictions for the treatment of DES, LO2A is only approved for sale for the treatment
of CCH in Hungary and for the treatment of Sjögren’s in the Netherlands. LO2A may never be successfully developed and
approved for sale or successfully commercialized for the treatment of CCH or for Sjögren’s in any other jurisdiction.
The failure to successfully commercialize LO2A for the treatment of CCH and Sjögren’s may have a material adverse effect
on our business and could depress the value of our Common Stock.
Our
restricted shares are subject to resale restrictions imposed by Rule 144, including those set forth in Rule 144(i) which applies
to a “shell company.”
Prior
to the Merger, we were a “shell company” under applicable SEC rules and regulations. Pursuant to Rule 144, promulgated
under the Securities Act, sales of the securities of a shell company, such as ours under that rule are not permitted until at
least 12 months have elapsed from the date on which we file with the SEC Form 10 information in a Current Report on Form 8-K,
reflecting our status as a non-shell company (which occurred on November 21, 2017). As a result, some of our stockholders would
be forced to hold their shares of Common Stock for at least that 12-month period before they are eligible to sell those shares,
and even after that 12-month period, sales may not be made under Rule 144 unless we and our relevant stockholders are in compliance
with other requirements of Rule 144. Further, it will be more difficult for us to raise funding to support our operations through
the sale of debt or equity securities, unless we agree to register such securities under the Securities Act, which could cause
us to expend additional time and cash resources. The lack of liquidity of our securities as a result of the inability to sell
under Rule 144 for a longer period of time could cause the market price of our securities to decline.
A
large number of shares are issuable upon conversion or exercise of outstanding Convertible Loans, Investment Rights, 2017 Warrants,
Series A Preferred Stock, Series A Warrants, Series B Warrants, Placement Agent Warrants and Advisor Warrants. The conversion
or exercise of these securities could result in the substantial dilution of your investment in terms of your percentage ownership
in our company. The sale of a large amount of Common Stock received upon exercise of these securities on the public market, or
the perception that such sales could occur, could substantially depress the prevailing market prices for our shares.
As
of November 20, 2018, there were outstanding presently convertible or exercisable (i) Convertible Loans entitling the holders to
purchase 1,399,290 shares of Common Stock at a weighted average exercise price of $1.0536 per share, (ii) Investment Rights entitling
the holders to purchase 890,138 shares of Common Stock at a weighted average exercise price of $1.3214 per share, (iii) 2017 Warrants
entitling the holders to purchase 759,871 shares of Common Stock at a weighted average exercise price of $1.9728 per share, (iv)
1,350 shares of Series A Preferred Stock issuable into 1,350,000 shares of Common Stock, (v) Series A Warrants entitling the holders
to purchase 4,450,000 shares of Common Stock at an exercise price of $1.10 per share, (vi) Series B Warrants entitling the holders
to purchase 4,450,000 shares of Common Stock at an exercise price of $1.00 per share, (vii) Placement Agent Warrants entitling
the holders to purchase 267,000 shares of Common Stock at an exercise price of $1.00 per share and (viii) Advisor Warrants entitling
the holder to purchase 89,000 shares of Common Stock at an exercise price of $1.10 per share. The exercise or conversion price
for all of the aforesaid securities may be less than your cost to acquire our shares. In the event of the exercise or conversion
of these securities, you could suffer substantial dilution of your investment in terms of your percentage ownership in our company.
In addition, the holders of such securities may sell shares in tandem with their exercise of those securities to finance that
exercise, which could further depress the market price of the Common Stock.
Raising
additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights
to LO2A.
We
may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships
and alliances and licensing arrangements. To the extent that we raise additional capital through the sale of equity or convertible
debt securities, the ownership interests of existing stockholders will be diluted, and the terms may include liquidation or other
preferences that adversely affect stockholder rights. Furthermore, the number of shares available for future grant under our equity
compensation plans may be increased in the future. Debt financing, if available, may involve agreements that include covenants
limiting or restricting our ability to take certain actions, such as incurring debt, making capital expenditures or declaring
dividends. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties,
we may have to relinquish valuable rights to our LO2A, or grant licenses on terms that are not favorable. If we are unable to
raise additional funds through equity or debt financing when needed, we may be required to delay, limit, reduce or terminate our
product development or commercialization efforts or grant rights to develop and market LO2A that we would otherwise prefer to
develop and market ourselves
.
Because
our Common Stock may be a “penny stock,” it may be more difficult for investors to sell shares of our Common Stock,
and the market price of our Common Stock may be adversely affected.
Our
Common Stock may be a “penny stock” if, among other things, the stock price is below $5.00 per share, it is not listed
on a national securities exchange or it has not met certain net tangible asset or average revenue requirements. Broker-dealers
who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC.
This document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock
market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and
salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain
the purchaser’s written agreement to the purchase. Broker-dealers must also provide customers that hold penny stock in their
accounts with such broker-dealer a monthly statement containing price and market information relating to the penny stock. If a
penny stock is sold to an investor in violation of the penny stock rules, the investor may be able to cancel its purchase and
get its money back.
If
applicable, the penny stock rules may make it difficult for investors to sell our shares of Common Stock. Because of the rules
and restrictions applicable to a penny stock, there is less trading in penny stocks and the market price of our Common Stock may
be adversely affected. Also, many brokers choose not to participate in penny stock transactions. Accordingly, investors may not
always be able to resell their shares of our Common Stock publicly at times and prices that they feel are appropriate.
We
may not be able to attract the attention of major brokerage firms, which may limit the liquidity of our Common Stock and may make
it more difficult for us to raise additional capital in the future.
Securities
analysts of major brokerage firms may not provide coverage of our Common Stock because there may be little incentive for brokerage
firms to recommend the purchase of our Common Stock. As a result, our Common Stock may have limited liquidity and investors may
have difficulty selling it. Furthermore, we cannot assure you that brokerage firms will want to conduct any secondary offerings
on our behalf if we seek to raise additional capital in the future. Our inability to raise additional capital may have a material
adverse effect on our business.
Future
sales of our Common Stock could reduce our stock price.
Sales
by stockholders of substantial amounts of our Common Stock, or the perception that these sales may occur in the future, including
the sale of shares by certain stockholders upon the expiration of the tax withholding deferral period set forth in the 104(h)
Tax Ruling, could materially and adversely affect the market price of our Common Stock. Furthermore, the market price of our Common
Stock could drop significantly if our executive officers, directors, or certain large shareholders sell their shares, or are perceived
by the market as intending to sell them.
The
concentration of the capital stock ownership with our insiders will likely limit the ability of our stockholders to influence
corporate matters.
As
of November 20, 2018, our executive officers, directors, five percent or greater stockholders, and their respective affiliated
entities in the aggregate beneficially own approximately 74.18% of our Common Stock. As a result of such ownership, despite the
fact that each one of them, to our knowledge, will continue to operate independently from the other with respect to their respective
shareholding of the Company’s shares, these stockholders, if acting together, will have control over matters that require
approval by our stockholders, including the election of directors and approval of significant corporate transactions. Corporate
actions might be taken even if other stockholders oppose them. This concentration of ownership might also have the effect of delaying
or preventing a corporate transaction that other stockholders may view as beneficial, including preventing changes in control
or in management. For more information about our current share ownership, please see “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT,” beginning on page 84
of this prospectus.
We
may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act
of 2002.
Prior
to the Merger, Wize Israel was traded on the Tel Aviv Stock Exchange (“TASE”) and was not subject to Section 404 of
the Sarbanes-Oxley Act of 2002. The standards required for a public company under Section 404 of the Sarbanes-Oxley Act of 2002
are different from those required of a public company whose shares are traded on the TASE. Management may not be able to effectively
and timely implement controls and procedures that adequately respond to the regulatory compliance and reporting requirements that
are applicable to us after the Merger. If management is not able to implement the additional requirements of Section 404 of the
Sarbanes-Oxley Act of 2002 in a timely manner or with adequate compliance, it may not be able to assess whether its internal control
over financial reporting is effective, which may subject us to adverse regulatory consequences and could harm investor confidence
and the market price of our Common Stock.
As
a result of the Merger, we may be required to take restructuring or other charges that could have a significant negative effect
on our financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.
As
a result of the Merger, the liabilities of Wize Israel, our wholly owned Israeli subsidiary, including contingent liabilities,
were consolidated into our financial statements. Although both parties conducted due diligence on each other, there can be no
assurances that the diligence revealed all material issues that may be present in the other company’s business, that all
material issues through a customary amount of due diligence will be uncovered, or that factors outside of our control will not
later arise. As a result, we may be forced to later restructure operations, or other charges that could result in losses. Even
if due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize
in a manner not consistent with each company’s preliminary risk analysis. Even though these charges may be non-cash items
and not have an immediate impact on liquidity, the fact that we report charges of this nature could contribute to negative market
perceptions about us or our securities. In addition, charges of this nature may make future financing difficult to obtain on favorable
terms or at all. If unknown pre-Merger liabilities arise, we may be required to divert cash from other business purposes to discharge
such liabilities, which may have an adverse effect on our business.
As
an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain
disclosure requirements.
As
an “emerging growth company” under the JOBS Act, we are permitted to, and intend to, rely on exemptions from certain
disclosure requirements. We are an emerging growth company until the earliest of: (i) the last day of the fiscal year during which
hawse have total annual gross revenues of $1.07 billion or more, (ii) the last day of the fiscal year following the fifth anniversary
of the date of the first sale of our Common Stock pursuant to an effective registration statement, (iii) the date on which we
have, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which we
are deemed a “large accelerated issuer” as defined in Regulation S-K of the Securities Act. For so long as we remain
an emerging growth company, we will not be required to:
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have
an auditor report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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comply
with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation
or a supplement to the auditor’s report providing additional information about the audit and the financial statements
(auditor discussion and analysis);
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submit
certain executive compensation matters to stockholders advisory votes pursuant to the “say on frequency” and “say
on pay” provisions (requiring a non-binding stockholder vote to approve compensation of certain executive officers)
and the “say on golden parachute” provisions (requiring a non-binding stockholder vote to approve golden parachute
arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank
Wall Street Reform and Consumer Protection Act of 2010; and
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include
detailed compensation discussion and analysis in its filings under the Exchange Act, and instead may provide a reduced level
of disclosure concerning executive compensation.
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Although
we intend to rely on the exemptions provided in the JOBS Act, the exact implications of the JOBS Act are still subject to interpretations
and guidance by the SEC and other regulatory agencies. In addition, as our business grows, we may no longer satisfy the conditions
of an emerging growth company.
We
have not paid, and do not intend to pay, dividends on our Common Stock and therefore, unless our Common Stock appreciates in value,
our investors may not benefit from holding our Common Stock.
We
have not paid any cash dividends on our Common Stock since inception and do not anticipate paying any cash dividends on our Common
Stock in the foreseeable future. In addition, we are restricted from paying any dividends without Rimon Gold’s consent so
long as our loans from Rimon Gold have not been repaid in full. As a result, investors in our Common Stock will not be able to
benefit from owning our Common Stock unless the market price of our Common Stock becomes greater than the price paid for the stock
by these investors.
Anti-takeover
provisions under Delaware law could make an acquisition of us, which may be beneficial to our stockholders, more difficult and
may prevent attempts by the stockholders to replace or remove management.
We
will be subject to the anti-takeover provisions of the Delaware General Corporation Law (“DGCL”), including Section
203. Under these provisions, if anyone becomes an “interested stockholder,” the combined company may not enter into
a “business combination” with that person for three years without special approval, which could discourage a third
party from making a takeover offer and could delay or prevent a change of control. For purposes of Section 203 of the DGCL, “interested
stockholder” means, generally, someone owning 15% or more of the combined company’s outstanding voting stock or an
affiliate of the combined company that owned 15% or more of the combined company’s outstanding voting stock during the past
three years, subject to certain exceptions as described in Section 203 of the DGCL. In addition, our Certificate of Incorporation
contains provisions, such as blank check preferred stock, advance notice, and stockholder action by written consent which could
make it more difficult for a third party to acquire us. These provisions may have the effect of preventing or hindering any attempts
by our stockholders to replace our Board of Directors (our “Board”) or management.
The
public trading market for our Common Stock is volatile and may result in higher spreads in stock prices, which may limit the ability
of our investors to sell their shares at a profit, if at all.
Our
Common Stock trades in the over-the-counter market and is quoted on the OTCQB. The over-the-counter market for securities has
historically experienced extreme price and volume fluctuations during certain periods. These broad market fluctuations may adversely
affect the market price of our Common Stock and result in substantial losses to its investors. In addition, the spreads on stock
traded through the over-the-counter market are generally unregulated and higher than on stock exchanges, which mean that the difference
between the price at which shares could be purchased by investors in the over-the-counter market compared to the price at which
they could be subsequently sold would be greater than on these exchanges. Significant spreads between the bid and asked prices
of the stock could continue during any period in which a sufficient volume of trading is unavailable or if the stock is quoted
by an insignificant number of market makers. Historically our trading volume has been insufficient to significantly reduce this
spread and has had a limited number of market makers sufficient to affect this spread. These higher spreads could adversely affect
investors who purchase the shares at the higher price at which the shares are sold, but subsequently sell the shares at the lower
bid prices quoted by the brokers. Unless the bid price for the stock exceeds the price paid for the shares by the investor, plus
brokerage commissions or charges, the investor could lose money on the sale. For higher spreads such as those on over-the-counter
stocks, this is likely a much greater percentage of the price of the stock than for exchange listed stocks. There is no assurance
that at the time an investor in our Common Stock wishes to sell the shares, the bid price will have sufficiently increased to
create a profit on the sale.
An
active market for our Common Stock may not develop.
Although
our Common Stock trades on the OTCQB, we do not have an active trading market and an active trading market may not develop. If
an active trading market does not develop, or is not sustained, it may be difficult for investors to sell their shares without
depressing the market price for the shares or at all. Further, an inactive market may also impair our ability to raise capital
by selling shares of our Common Stock and may impair our ability to enter into strategic partnerships or acquire companies or
products by using our shares of Common Stock as consideration.
Our
Common Stock is thinly traded, so you may be unable to sell at or near ask prices or at all if you need to sell your shares to
raise money or otherwise desire to liquidate your shares.
Our
Common Stock has historically been sporadically traded on the OTCQB, meaning that the number of persons interested in purchasing
our shares at or near ask 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 which is relatively unknown to stock analysts, stock brokers,
institutional investors and others in the investment community that generate or influence sales volume, and that even if we came
to the attention of such persons, they tend to be risk-averse and would be reluctant to follow an unproven company such as ours
or purchase or recommend the purchase of our shares until such time as we became more seasoned and viable. 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. We cannot give you any assurance that a broader or more active public trading market for our Common Stock
will develop or be sustained, or that current trading levels will be sustained.
Our
Board can, without stockholder approval, cause preferred stock to be issued on terms that adversely affect common stockholders
or which could be used to resist a potential take-over of us.
Under
our Certificate of Incorporation, our Board is authorized to issue up to 1,000,000 shares of preferred stock, 1,350 of which are
issued and outstanding as of the date of this prospectus. Also, our Board, without stockholder approval, may determine the price,
rights, preferences, privileges and restrictions, including voting rights, of those shares. If the Board causes shares of preferred
stock to be issued, the rights of the holders of our Common Stock could be adversely affected. The Board’s ability to determine
the terms of preferred stock and to cause its issuance, while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of making it more difficult for a third party to acquire a majority of our
outstanding voting stock. Preferred shares issued by the Board could include voting rights, or even super voting rights, which
could shift the ability to control us to the holders of the preferred stock. Preferred shares could also have conversion rights
into shares of Common Stock at a discount to the market price of the Common Stock which could negatively affect the market for
our Common Stock. In addition, preferred shares would have preference in the event of liquidation of the corporation, which means
that the holders of preferred shares would be entitled to receive the net assets of the corporation distributed in liquidation
before the Common Stock holders receive any distribution of the liquidated assets. We have no current plans to issue any shares
of preferred stock.
The
market price of our Common Stock may fluctuate significantly, which could result in substantial losses by our investors.
The
market price of our Common Stock may fluctuate significantly in response to numerous factors, some of which are beyond its control,
such as:
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announcements
of technological innovations, new products or product enhancements by us or others;
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announcements
by us of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments;
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expiration
or terminations of licenses, research contracts or other collaboration agreements;
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public
concern as to the safety of LO2A;
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success
of research and development projects;
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success
in clinical and preclinical studies;
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developments
concerning intellectual property rights or regulatory approvals;
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variations
in our and our competitors’ results of operations;
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changes
in earnings estimates or recommendations by securities analysts, if our Common Stock is covered by analysts;
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changes
in government regulations or patent decisions;
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developments
by our licensees;
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developments
in the biotechnology industry;
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the
results of product liability or intellectual property lawsuits;
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future
issuances of Common Stock or other securities;
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the
addition or departure of key personnel;
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announcements
by us or our competitors of acquisitions, investments or strategic alliances;
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general
market conditions, including the volatility of market prices for shares of biotechnology companies generally, and other factors,
including factors unrelated to our operating performance; and
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the
other factors described in the section entitled “RISK FACTORS,” beginning on page 5
of this prospectus.
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These
factors and any corresponding price fluctuations may materially and adversely affect the market price of our Common Stock and
result in substantial losses by our investors.
Further,
the stock market in general, and the market for biotechnology companies in particular, has experienced extreme price and volume
fluctuations in the past. Continued market fluctuations could result in extreme volatility in the price of our Common Stock, which
could cause a decline in the value of our Common Stock. Price volatility of our Common Stock might be worse if the trading volume
of our Common Stock is low. In the past, following periods of market volatility, stockholders have often instituted securities
class action litigation. If we are involved in securities litigation, it could have a substantial cost and divert resources and
attention of management from our business, even if successful. Future sales of our Common Stock could also reduce the market price
of such stock.
Risks
Related to our Operations in Israel
Potential
political, economic and military instability in the State of Israel, where our senior management and our head executive office
facilities are located, may adversely affect our results of operations.
Our
executive office where we conduct initial research and development activities, as well as some of our clinical sites and suppliers
are located in Israel. Our officers and our directors are residents of Israel. Accordingly, political, economic and military conditions
in Israel and the surrounding region may directly affect our business and operations. Since the establishment of the State of
Israel in 1948, a number of armed conflicts have taken place between Israel and its Arab neighbors. Any hostilities involving
Israel or the interruption or curtailment of trade within Israel or between Israel and its trading partners could adversely affect
our operations and results of operations and could make it more difficult for us to raise capital. During the summer of 2014 and
the winter of 2012 and 2008, Israel was engaged in an armed conflict with Hamas, a militia group and political party operating
in the Gaza Strip, and during the summer of 2006, Israel was engaged in an armed conflict with Hezbollah, a Lebanese Islamist
Shiite militia group and political party. These conflicts involved missile strikes against civilian targets in various parts of
Israel, and negatively affected business conditions in Israel. To date, Israel faces political tension with respect to its relationships
with Turkey, Iran and other Arab neighbor countries. In addition, recent political uprisings and social unrest in various countries
in the Middle East and North Africa are affecting the political stability of those countries. This instability may lead to deterioration
of the political relationships that exist between Israel and these countries, and have raised concerns regarding security in the
region and the potential for armed conflict. Any armed conflicts, terrorist activities or political instability in the region
could adversely affect business conditions and could harm our results of operations. For example, any major escalation in hostilities
in the region could result in a portion of our employees and service providers being called up to perform military duty for an
extended period of time. Parties with whom we do business have sometimes declined to travel to Israel during periods of heightened
unrest or tension, forcing us to make alternative arrangements when necessary. In addition, the political and security situation
in Israel may result in parties with whom we have agreements involving performance in Israel claiming that they are not obligated
to perform their commitments under those agreements pursuant to force majeure provisions in such agreements. Any future deterioration
in the political and security situation in Israel will negatively impact our business.
Our
commercial insurance does not cover losses that may occur as a result of events associated with the security situation in the
Middle East. 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. Any losses or damages incurred
by us could have a material adverse effect on our business. Any armed conflicts or political instability in the region would likely
negatively affect business conditions and could harm our results of operations.
Further,
in the past, the State of Israel and Israeli companies have been subjected to an economic boycott. Several countries still restrict
business with the State of Israel and with Israeli companies. These restrictive laws and policies may have an adverse impact on
our operating results, financial condition or the expansion of our business.
Our
operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.
Many
Israeli citizens, including Or Eisenberg, our Acting Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary,
are obligated to perform one month, and in some cases more, of annual military reserve duty until they reach the age of 45 (or
older, for reservists with certain occupations) and, in the event of a military conflict, may be called to active duty. In response
to increases in terrorist activity, there have been periods of significant call-ups of military reservists. It is possible that
there will be military reserve duty call-ups in the future. Our operations could be disrupted by such call-ups, which may include
the call-up of Or Eisenberg. Such disruption could materially adversely affect our business, financial condition and results of
operations.
Because
a certain portion of our expenses is incurred in currencies other than the US Dollar, our results of operations may be harmed
by currency fluctuations and inflation.
Our
reporting and functional currency is the U.S. Dollar, but some portion of our clinical trials and operations expenses are in NIS
and Euro. As a result, we are exposed to some currency fluctuation risks, largely derived from our current and future engagements
for financing and distribution. Fluctuation in the exchange rates of foreign currency has an influence on the cost of goods sold
and our financing revenues and expenses. We may, in the future, decide to enter into currency hedging transactions to decrease
the risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the US
Dollar. These measures, however, may not adequately protect us from adverse effects.
Investors
may have difficulties enforcing a U.S. judgment, including judgments based upon the civil liability provisions of the U.S. federal
securities laws against us and our officers and directors or asserting U.S. securities laws claims in Israel.
Our
directors and officers are not residents of the United States and our assets are located outside the United States. Service of
process upon our directors and officers and enforcement of judgments obtained in the United States against us, and our directors
and officers may be difficult to obtain within the United States. We have been informed by our legal counsel in Israel that it
may be difficult to assert claims under U.S. securities laws in original actions instituted in Israel or obtain a judgment based
on the civil liability provisions of U.S. federal securities laws. Israeli courts may refuse to hear a claim based on a violation
of U.S. securities laws against our officers and directors because Israel may not be the most appropriate forum to bring such
a claim. In addition, even if an Israeli court agrees to hear a claim, it may determine that Israeli law and not U.S. law is applicable
to the claim. If U.S. law is found to be applicable, the content of applicable U.S. law must be proved as a fact, which can be
a time-consuming and costly process. Certain matters of procedure will also be governed by Israeli law. There is little binding
case law in Israel addressing the matters described above. Israeli courts might not enforce judgments rendered outside Israel,
which may make it difficult to collect on judgments rendered against us and/or our officers and directors.
Moreover,
among other reasons, including but not limited to, fraud, a lack of due process, a judgment which is at variance with another
judgment that was given in the same matter and if a suit in the same matter between the same parties was pending before a court
or tribunal in Israel, an Israeli court will not enforce a foreign judgment if it was given in a state whose laws do not provide
for the enforcement of judgments of Israeli courts (subject to exceptional cases) or if its enforcement is likely to prejudice
the sovereignty or security of the State of Israel.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus (including the section regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations)
and any prospectus supplement 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 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, the factors summarized below.
This
prospectus 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 the heading “RISK FACTORS,” beginning on page 5
of this prospectus. The risk factors included in this prospectus 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,
you 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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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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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, LO2A and on the continuation of our license to commercialize LO2A;
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our
inability to expand our rights under our license agreement for LO2A 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 its 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 its ability to
operate its business without infringing the intellectual property rights of others;
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estimates
of our expenses, future revenues, and capital requirements;
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competitive
companies, technologies and its 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 prospectus and
are expressly qualified in their entirety by the cautionary statements included in this prospectus. 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.
USE
OF PROCEEDS
We
will not receive any of the proceeds from the sale of the shares of our Common Stock being offered for sale by the selling stockholders.
Upon the exercise of the 2018 Warrants for an aggregate of 9,256,000 shares of Common Stock by payment of cash however, we will
receive the exercise price of the 2018 Warrants, or an aggregate of approximately $9,709,900. We will bear all fees and expenses
incident to our obligation to register the shares of common stock. Brokerage fees, commissions and similar expenses, if any, attributable
to the sale of shares offered hereby will be borne by the applicable selling stockholders.
MARKET
PRICE AND DIVIDENDS
Market
Price for our Common Stock
Our
Common Stock began trading on the OTC Pink and its predecessors under the symbol “OPLI” on January 25, 2012 through
November 15, 2017, and under the symbol “WIZP” from November 16, 2017 through January 3, 2018. Since January 4, 2018,
our Common Stock has been traded on the OTCQB under the symbol “WIZP.” Following the Reverse Stock Split, a “D”
was placed on our ticker symbol (WIZPD) for 20 business days from March 5, 2018, the effective date of the Reverse Stock Split.
After 20 business days, the symbol was changed back to “WIZP.”
The
following table sets forth the range of the high and low closing prices of our Common Stock for the periods indicated, as adjusted
for the Reverse Stock Split.
2018
|
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HIGH
|
|
|
LOW
|
|
First Quarter
|
|
$
|
3.74
|
|
|
$
|
2.99
|
|
Second Quarter
|
|
$
|
6.05
|
|
|
$
|
3.59
|
|
Third Quarter
|
|
$
|
6.10
|
|
|
$
|
2.00
|
|
Fourth Quarter (through November 20, 2018)
|
|
$
|
3.25
|
|
|
$
|
1.70
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|
2017
|
|
HIGH
|
|
|
LOW
|
|
First Quarter
|
|
$
|
24.00
|
|
|
$
|
8.40
|
|
Second Quarter
|
|
$
|
36.00
|
|
|
$
|
2.64
|
|
Third Quarter
|
|
$
|
23.48
|
|
|
$
|
2.64
|
|
Fourth Quarter
|
|
$
|
10.80
|
|
|
$
|
1.68
|
|
2016
|
|
HIGH
|
|
|
LOW
|
|
First Quarter
|
|
$
|
23.76
|
|
|
$
|
23.76
|
|
Second Quarter
|
|
$
|
24.24
|
|
|
$
|
8.64
|
|
Third Quarter
|
|
$
|
24.00
|
|
|
$
|
10.80
|
|
Fourth Quarter
|
|
$
|
24.00
|
|
|
$
|
24.00
|
|
The foregoing quotations were provided by
Yahoo! Finance and the quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent
actual transactions. The last reported closing price per share of our Common Stock as quoted on the OTCQB was $2.29 on November
20, 2018.
Holders
As
of November 20, 2018, there were approximately 93 stockholders of record holding 6,534,480 shares of our Common Stock. This number
does not include an indeterminate number of stockholders whose shares are held by brokers in street name. The holders of our Common
Stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders. Holders of our
Common Stock have no preemptive rights and no right to convert their Common Stock into any other securities. There are no redemption
or sinking fund provisions applicable to our Common Stock.
Dividend
Policy
We
have never paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in
the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements of our
business. Any future determination to pay cash dividends will be at the discretion of our Board and will be dependent upon our
financial condition, results of operations, capital requirements and such other factors as our Board deems relevant. Our ability
to pay cash dividends is subject to limitations imposed by state law. In addition, we are restricted from paying any dividends
without Rimon Gold’s consent so long as our loans from Rimon Gold have not been repaid in full.
OUR
BUSINESS
Overview
We
are a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including 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 CCH, and 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 and CCH and in the Netherlands for the treatment of DES and Sjögren’s.
We
intend to market LO2A as a treatment for DES and other ophthalmic inflammations, including CCH and Sjögren’s in
the United States, Israel, Ukraine and China, the territories that we have licensed LO2A, and in additional territories,
subject to 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. Currently, we have a
distribution agreement for marketing in Israel, where LO2A is approved for the treatment of DES only, a distribution
agreement for marketing in Ukraine, where LO2A is in the approval process for the treatment of DES, and a distribution
agreement for distribution in China, where the evaluation and preparation for the registration process commenced in December
2017 by the Chinese Distributor). 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, Ukraine and Israel.
Historical
Background and Corporate Details
We
were originally incorporated in the State of Nevada on December 10, 1999, under the name Bridge Capital.com, Inc. which was a
nominally capitalized corporation that did not commence its operations until it changed its name to Denali Concrete Management,
Inc., or Denali, in March 2001. Denali was a concrete placement company specializing in providing concrete improvements in the
road construction industry and operated primarily in Anchorage, Alaska, placing curb and gutter, sidewalks and retaining walls
for state, municipal and military projects. In December 2005, Denali ceased its principal business operations and focused its
efforts on seeking a business opportunity.
Denali
consummated a reverse merger transaction on November 21, 2011, in connection with which the following events occurred:
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We
entered into and completed a stock purchase agreement with Can-Fite BioPharma Ltd. (“Can-Fite”), our former controlling
shareholder, whereby Can-Fite purchased 333,333 of shares of our Common Stock in exchange for all of the issued and outstanding
ordinary shares of Eye-Fite Ltd. (“Eye-Fite”). As a result of the consummation of the actions contemplated by
such agreement, Eyefite became our wholly-owned subsidiary and Can-Fite became our majority stockholder and a parent;
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Eyefite
and Can-Fite entered into a license agreement dated November 21, 2011 (the “Can-Fite License Agreement”) pursuant
to which Can-Fite granted to Eyefite a sole and exclusive worldwide license for the use of CF101, Can-Fite’s therapeutic
drug candidate, solely in the field of ophthalmic indications; and
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Eyefite
and Can-Fite entered into a services agreement dated November 21, 2011 (the “Eyefite Services Agreement”) pursuant
to which Can-Fite managed, as an independent contractor, all activities relating to pre-clinical and clinical studies performed
for the development of the ophthalmic indications of CF101.
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Upon
completion of the reverse merger, and after giving effect to the transactions described above, we had an aggregate of 435,052
issued and outstanding shares of Common Stock. Of these shares Can-Fite owned approximately 82%. Following the transactions, we,
through our wholly owned subsidiary, Eyefite, became a clinical-stage biopharmaceutical company focused on developing therapeutic
products for the treatment of ophthalmic diseases.
On
January 25, 2012, we changed our name and trading symbol on the OTC Pink to OphthaliX Inc. and OPLI, respectively. On February
6, 2012, our majority stockholder, Can-Fite, approved (a) a change in our state of incorporation from the State of Nevada to the
State of Delaware and (b) an amendment to our Certificate of Incorporation to increase the number of authorized shares of our
common stock, par value $0.001 per share, from 50,000,000 to 100,000,000. The effective date for these changes was April 2, 2012.
On
July 18, 2013, our stockholders approved a reverse stock split of one share of our Common Stock for each four and one-half shares
outstanding (1:4.5). The reverse split became effective as of the close of business on August 6, 2013.
On
September 21, 2016, after a unanimous vote by our Board on September 19, 2016, our majority stockholder, Can-Fite, approved (1)
our voluntary dissolution and liquidation pursuant to a Plan of Dissolution, and (2) the re-election of the following five directors,
to comprise the entire board of directors, to serve until the next annual meeting of stockholders and until their successors are
elected and qualified: Pnina Fishman, Ilan Cohn, Guy Regev, Roger Kornfeld and Michael Belkin. The Plan of Dissolution was expected
to go into effect 20 days after the date an information statement (the “Definitive Information Statement”) was first
given to all our stockholders who did not execute the written consent of Can-Fite.
Prior
to the distribution of the Definitive Information Statement, on November 10, 2016, our Board abandoned its voluntary dissolution
and liquidation. On the same day, our Board authorized its entry into a non-binding letter of intent with Wize Israel for a proposed
reverse merger. Subsequently, on May 21, 2017, we entered into the Merger Agreement, with Merger Sub and Wize Israel, which contemplated
the merger of Merger Sub with and into Wize Israel, with Wize Israel continuing as the surviving entity and becoming our wholly
owned subsidiary. The dissolution mentioned above was suspended following our agreement with Wize Israel to effect the Merger
pursuant to the Merger Agreement and the re-election of directors was not effected.
On
October 10, 2017, at our annual meeting of stockholders (the “2017 Annual Meeting”), our stockholders approved, among
other matters, (a) an amendment to our Certificate of Incorporation to increase the number of authorized shares of our common
stock, par value $0.001 per share, from 100,000,000 to 500,000,000, (b) an amendment to our Certificate of Incorporation to change
our name from “OphthaliX, Inc.” to “Wize Pharma, Inc.” immediately prior to the Merger, and (c) the re-election
Pnina Fishman, Ilan Cohn, Guy Regev, Roger Kornberg and Michael Belkin to hold office until the next annual meeting of stockholders
and until their respective successors are duly elected and qualified; provided, however, that, if the Merger is completed, our
Board will be reconstituted as described in the proxy statement/prospectus relating to our 2017 Annual Meeting.
On
October 31, 2017, Merger Sub, Wize Israel and us entered into an amendment to the Merger Agreement which extended the expiration
date of the Merger Agreement until November 30, 2017.
On
November 16, 2017, we were renamed “Wize Pharma, Inc.,” and completed our transaction with Wize Israel in accordance
with the terms of the Merger Agreement pursuant to which Merger Sub merged with and into Wize Israel, with Wize Israel surviving
as our wholly owned subsidiary. Prior to the Merger, we had no active business and were a “shell company” as such
term is defined in Rule 12b-2 under the Exchange Act. As a result of the Merger, we have ceased to be a “shell company.”
In
connection with the Merger and under the terms of the Merger Agreement:
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at
the effective time of the Merger (the “Effective Time”) each ordinary share of Wize Israel that was issued and
outstanding was automatically cancelled and converted into 4.1445791236989 shares of our Common Stock (the “Exchange
Ratio”) (not adjusted for the Reverse Stock Split). As a result, an aggregate of 3,915,469 shares of our Common Stock
were issued to former Wize Israel shareholders. Our pre-Merger stockholders retained an aggregate of 435,053 shares of our
Common Stock;
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a
convertible loan entered into between Wize Israel and Rimon Gold entered into on March 20, 2016 (as amended on March 30, 2016,
December 21, 2017 and October 19, 2018, the “2016 Loan Agreement”) in the principal amount of $531,067 was adjusted
based on the Exchange Ratio and became convertible into shares of our Common Stock at a conversion price of $0.9768, subject
to adjustments for stock splits and similar events set forth in the 2016 Loan Agreement;
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a
convertible loan entered into between Wize Israel and Ridge, and, by way of entering into assignments and assumption agreements
following such date, also with Rimon Gold and Fisher (Ridge, Rimon Gold and Fisher together being referred to herein as the
“2017 Lenders”), entered into on January 15, 2017 (as amended on December 21, 2017 and October 19, 2018, the “2017
Loan Agreement”) in the principal amount of $822,144, was adjusted based on the Exchange Ratio and became convertible
into shares of our Common Stock at a conversion price of $1.1112, subject to adjustments for stock splits and similar events
set forth in the 2017 Loan Agreement;
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under
the 2016 Loan Agreement, as modified by the 2017 Loan Agreement, Rimon Gold has the right, until June 30, 2019, to invest
up to $796,601, in the aggregate, at an agreed price per share (as adjusted based on the Exchange Ratio and the 2017 Loan
Amendment (as defined below)) of $1.308, if we conduct any equity financing (which condition was met in full upon the closing
of the 2017 PIPE (as defined below)) (the “2016 Investment Right”);
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under
the 2017 Loan Agreement, the 2017 Lenders, have the right until June 30, 2019, to invest up to $411,072, in the aggregate,
at an agreed price per share (as adjusted based on the Exchange Ratio and the Loan Amendment) of $1.332 (the “2017 Investment
Right” and, together with the 2016 Investment Right, the “Investment Rights”);
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Wize
Israel undertook to cause us to issue, to investors in a private placement of Wize Israel that was completed in July and August
2017, warrants to purchase (as adjusted based on the Exchange Ratio) an aggregate of 904,036 shares of our Common Stock at
an exercise price of $1.9728 (the “2017 Warrants”), which 2017 Warrants were granted on November 16, 2017;
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immediately
prior to the Effective Time, we sold on an “as is” basis to Can-Fite all the ordinary shares of Eyefite, in exchange
for the irrevocable cancellation and waiver of all indebtedness owed by us and Eyefite to Can-Fite, including approximately
$5 million of deferred payments owed by us and Eyefite to Can-Fite and, as part of the purchase of Eyefite, Can-Fite also
assumed certain accrued milestone payments in the amount of $175,000 under the Can-Fite License Agreement. In addition, that
certain exclusive license of Can-Fite’s CF101 drug candidate for the treatment of ophthalmic diseases granted to us
and the Eyefite Services Agreement was terminated pursuant to a Termination of License Agreement and a Termination of Services
Agreement that was entered into on the Closing Date;
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immediately
following the Effective Time, Ron Mayron, Yossi Keret, Dr. Franck Amouyal and Joseph Zarzewsky were appointed to our Board
to hold office until the earlier of the next annual meeting where directors will be appointed, such director’s successor
is elected and qualified, or until such director’s earlier resignation or removal and following those appointments,
Pnina Fishman, Ph.D. Ilan Cohen, Ph.D., Guy Regev and Roger Kornberg, Ph.D. resigned from our Board. Accordingly, our Board
consists of five members, Ron Mayron, Yossi Keret, Dr. Franck Amouyal, Joseph Zarzewsky and Dr. Michael Belkin;
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immediately
following the Effective Time, Pnina Fishman, Ph.D., Itay Weinstein and Ronen Kantor resigned as our officers and the newly
constituted board appointed Or Eisenberg as Acting Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary
and Noam Danenberg as Chief Operating Officer;
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our
Common Stock continued to be quoted on the OTC Pink under the new trading symbol “WIZP” until January 4
,
2018, when we commenced trading our Common Stock on the OTCQB; and
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Wize
Israel ordinary shares were delisted from the TASE and there was no longer be a public trading market for Wize Israel ordinary
shares.
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Immediately
following the completion of the Merger, our pre-Merger stockholders continued to hold 435,053 shares, or 10% of our issued and
outstanding Common Stock, and former Wize Israel shareholders own 3,915,469 shares, or 90% of our issued and outstanding Common
Stock (both percentages excluding (i) shares of Common Stock issuable upon the exercise of the Convertible Loans, (ii) shares
of Common Stock issuable upon the exercise of the Investment Rights, (iii) shares of Common Stock issuable upon the exercise of
the 2017 Warrants, and (iv) shares of Common Stock issuable upon the exercise of certain options held by our pre-Merger directors
and officers (the “Wize Stock Options”). In the event all the Convertible Loans, Investment Rights, 2017 Warrants
and Wize Stock Options outstanding as of the Effective Time were to be exercised in full, then our pre-Merger stockholders and
option holders would own 439,949 shares and their combined ownership percentage would be reduced to approximately 5.4% of our
issued and outstanding Common Stock, and the former Wize Israel shareholders and holders of Convertible Loans, Investment Rights,
2017 Warrants and Wize Stock Options on a combined basis would own 7,750,651 shares, or approximately 94.6% of our issued and
outstanding Common Stock, assuming, for the purposes of this calculation, a total of 8,190,600 shares of our Common Stock issued
and outstanding on a fully diluted basis.
As
a result of the Merger, the business of Wize Israel became our ongoing business.
The
Merger was accounted for as a reverse recapitalization of us by Wize Israel. Under reverse recapitalization accounting, our assets
and liabilities were recorded, as of the completion of the Merger, at their historical amounts. Consequently, the annual consolidated
financial information of Wize Israel for the year ended December 31, 2017 and the quarterly financial information of Wize Israel
for the three months ended September 30, 2018 reflects the operations of the acquirer for accounting purposes together with a
deemed issuance of shares, equivalent to the shares held by the former stockholders of the legal acquirer and a recapitalization
of the equity of the accounting acquirer. The annual consolidated financial information of Wize Pharma, Inc. for the year ended
December 31, 2017 and the consolidated financial information of Wize Pharma, Inc. for the quarter ended September 30, 2018, includes
the accounts of Wize Israel since inception and our accounts since the effective date of the reverse recapitalization.
On
March 5, 2018, we effected the Reverse Stock Split.
The
following is a historical background and corporate history of Wize Israel prior to the Merger:
Wize
Israel’s legal and commercial name is Wize Pharma Ltd. It was formed under the laws of the State of Israel as a company
limited by shares on June 23, 1982, under the name Eitam Eretz Israel Advanced Industries Ltd. In November 1997, Wize Israel changed
its name to Orlil Holdings (1982) Ltd. and in June 2011, Wize Israel changed its name to Star Night Technologies Ltd. In July
2015, Wize Israel changed its name to its current name.
In
June 1982, Wize Israel completed its initial public offering in Israel and its ordinary shares began trading on the TASE. Prior
to the Merger, Wize Israel’s ordinary shares were traded on the TASE under the symbol “WIZP”. From inception
until February 2015, Wize Israel engaged in various businesses and in February 2015 Wize Israel became a public shell company.
In
December 2014, an Israeli court approved a creditors arrangement (the “Creditors’ Arrangement”) under the Israeli
Companies Law between Wize Israel (then known as Star Night Technologies Ltd.), its creditors and its shareholders, in which Wize
Israel was purchased by a group of investors led by Ridge. Upon the completion of the Creditors’ Arrangement, all of Wize
Israel’s assets, rights and obligations were transferred to the creditors’ arrangement fund, so that Wize Israel’s
equity after the approval of such arrangement was zero and Wize Israel remained a public shell company without any activity, rights
or obligations. The Creditors’ Arrangement was completed in February 2015.
Below
is a summary of the major business developments in Wize Israel following the completion of the Creditors’ Arrangement and
prior to the Merger:
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On
May 1, 2015, Wize Israel entered into the LO2A License Agreement, whereby Resdevco granted to Wize Israel an exclusive license
to purchase, market, sell and distribute LO2A in the United States, Israel and Ukraine as well as a contingent right to do
the same in other countries. For more information about the LO2A License Agreement, see under “- LO2A License Agreement,”
beginning on page 36 of this prospectus.
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Between
April 2015 and August 2017, Wize Israel entered into a series of equity and debt financings, raising a total of approximately
NIS 12.6 million (approximately $3.7 million). For more information about these financings, see “MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” beginning on page 64
of this prospectus.
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In
August 2016, Wize Israel commenced a Phase II, randomized, double-blind, placebo-controlled, clinical trials to evaluate the
safety and efficacy of LO2A for patients suffering from moderate to severe CCH.
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Our
corporate headquarters are located in Hod Hasharon, Israel. Our telephone number is +972-72-2600536, and our website is located
at www.wizepharma.com. This website is an inactive textual reference only and not an active hyperlink. The information on or that
can be accessed through our website is specifically not incorporated by reference into this prospectus, and is not a part of this
prospectus.
The
Market Opportunity
We
(through Wize Israel) have licensed certain rights to purchase, market, sell and distribute LO2A for the treatment of DES and
other ophthalmological illnesses, including CCH and Sjögren’s in the United States, Israel, Ukraine, China and have
an option to purchase the rights to additional territories as further described in the LO2A License Agreement below.
Dry
Eye Syndrome:
DES is an eye disease caused by eye dryness, which, in turn, is caused by either decreased tear production or
increased tear film evaporation. The tear film is comprised of the lower mucous layer which helps the tear film adhere to the
eyes, a middle layer of water and an upper oil layer that seals the tear film and prevents evaporation. The tear film keeps the
eye moist, creates a smooth surface for light to pass through the eye, nourishes the front of the eye and provides protection
from injury and infection. DES is usually caused by aqueous tear deficiency, or inadequate tear production, whereby the lachrymal
gland, the gland that secretes the aqueous layer of the tear film, does not produce sufficient tears to keep the entire conjunctiva,
or the tissue inside the eyelids that covers the sclera, and cornea covered by a complete layer of tear film. In rare cases, aqueous
tear deficiency may be a symptom of collagen vascular diseases, including rheumatoid arthritis, Wegener’s granulomatosis,
an incurable form of vasculitis (the inflammatory destruction of blood vessels), systemic lupus erythematosus, an autoimmune connective
tissue disease, Sjögren’s, an autoimmune process in which patients suffer from mouth and eye dryness, and autoimmune
diseases associated with Sjögren’s. DES can also be caused by abnormal tear composition resulting in rapid evaporation
or premature destruction of tears. Additional causes include, but are not limited to, age, use of certain drugs and the use of
contact lenses.
DES
is characterized by eye irritation symptoms, blurred and fluctuating vision, tear film instability, increased tear osmolarity
and ocular surface epithelial disease. DES causes constant ocular discomfort, typically dryness, burning, a sandy-gritty eye irritation
and a decrease in visual function. Over an extended period of time, DES can lead to tiny abrasions on the surface of the eyes.
In advanced cases, the epithelium undergoes pathologic changes, namely squamous metaplasia, a non-cancerous change of surface-lining
cells, and loss of goblet cells, which secrete mucin, which in turn dissolves in water to form mucous. Some severe cases result
in thickening of the corneal surface, corneal erosion, epithelial defects, corneal ulceration (sterile and infected), corneal
neovascularization, or excessive ingrowth of blood vessels, corneal scarring, corneal thinning, and even corneal perforation.
In the most severe cases, DES may result in deterioration of vision.
In
a Market Scope Dry Eye Report (the “Market Scope Report”), it was estimated that in 2016, approximately 344 million
people around the world suffered from various levels of DES and Market Scope expects the global dry eye treatments market to total
$3.7 billion in 2017 and to reach $4.9 billion in 2022. According to the Market Scope Report, the factors that contribute to the
increase in the number of those suffering from DES include the extended viewing of television, computer and Smartphone screens,
weather conditions, exposure to air conditioning and increased life expectancy. According to the abovementioned report, the global
DES treatments market is expected to grow at a compounded annual growth rate of 5.5 percent, reaching $4.5 billion in 2021.
The highest rate of growth is expected to occur in China, India, and other emerging markets where they forecast double-digit compounded
annual growth rates due to aging populations, increasing wealth, and improving access to health care.
Conjunctivochalasis
:
CCH refers to the presence of redundant folds of loose conjunctiva. CCH is thought to be caused by both a gradual thinning and
stretching of the conjunctiva that accompanies age and a loss of adhesion between the conjunctiva and underlying sclera due to
the dissolution of Tenon’s capsule. A correlation may also exist between eye inflammation and CCH, though it is unclear
if this correlation is causal. CCH may also be associated with previous surgery, blepharitis, Meibomian gland disorder, Ehlers-Danlos
Syndrome and aqueous tear deficiency. The resulting loose, excess conjunctiva may mechanically irritate the eye and disrupt the
tear film and its outflow, leading to dry eye and excess tearing. Most patients with CCH complain of foreign body sensation, tearing,
difficulty reading, blurred vision, “red eyes” and general irritation.
Lid
Parallel Conjunctival Folds (“LIPCOF”) grading measures the number and severity of the lid-parallel conjunctival folds.
LIPCOF grade 0 signifies the absence of conjunctival folds, LIPCOF grade 1 signifies just one conjunctival fold, LIPCOF grade
2 signifies for multiple conjunctival folds, not extending beyond the tear meniscus, and LIPCOF grade 3 signifies multiple conjunctival
folds extending above the tear meniscus. The LIPCOF grades show a strong correlation with both the subjective and objective complaints
of DES, as well as with the severity of the disease.
The
treatment of LIPCOF grade 3 CCH usually requires invasive therapies like surgery or treatment of the conjunctival folds with argon
laser or with heat cauterization. A previous study conducted by Resdevco in 2013, has shown Conheal® (Hungarian brand name
for LO2A) to be effective in reducing the severity of CCH as measured by a reduction in the (i) LIPCOF score, (ii) Oxford scheme
grade and (iii) ocular surface disease index (“OSDI”) and an increase in tear film break-up time (“TFBUT”).
This raises the possibility that vision-related quality of life can be significantly improved by conservative therapies even in
severe CCH.
There
is little epidemiological data for CCH. A community based study in Shanghai reported that in patients over the age of 60, 4% had
LIPCOF grade 3 CCH
and 16% had LIPCOF grade 2 CCH. In the European Union, about 20% of the population
is over the age of 65. From the aforementioned data, it might be assumed, as presented in a study conducted by Dr. Huba J. Kiss
and János Németh, that in the total European Union population, 0.8% have LIPCOF grade
3 CCH and 3.2% have LIPCOF grade 2 CCH. Since DES complaints occur in 5.5% to 33.7%
of the population, Dr. Kiss and Németh further assumed that the incidence of the CCH-caused DES in the population is about
one-third of all DES cases.
Sjögren’s
syndrome
: Sjögren’s syndrome is a heterogeneous, chronic, inflammatory, autoimmune disease characterized by lymphocytic
infiltration of exocrine glands and expression of autoantibodies including antinuclear antibody (ANA), anti-Ro (also termed anti
SSA), anti-La (also termed anti SSB) as well as rheumatoid factor (RF). Hypergammaglobulinemia is common as well. Sjögren’s
may be an isolated disease, termed primary Sjögren’s syndrome or may accompany another autoimmune diseases, such as
lupus, rheumatoid arthritis, or scleroderma, thus termed secondary Sjögren’s syndrome. Clinical presentation varies
from mild symptoms such as classic sicca symptoms of dry eyes (xerophthalmia), dry mouth (xerostomia) and parotid gland enlargements
to severe systemic symptoms involving multiple organ systems such as fever, fatigue, malaise, arthritis, arthralgia, myalgia,
interstitial lung disease, kidney disease, gastrointestinal disease and neurological manifestations. Sjögren’s treatment
is highly individualized and is based on a patient’s disease severity, organ involvement and previous response. Mild forms
of Sjögren’s may be treated symptomatically with artificial tears and salivary flow stimulation. More severe, systemic
manifestations may be treated with high-dose glucocorticoids and immunosuppressive or cytotoxic drugs to suppress the immune system.
Estimations
of Sjögren’s prevalence vary from 2.5 million to 4 million patients (Sjögren’s Syndrome Foundation) in the
US alone, with a worldwide estimate of up to 7.7 million in the 7 Major Markets (US, France, Germany, Italy, Spain, the UK and
Japan) by the year 2024 (Global Data Research). Sjögren’s affects mostly middle aged women (40-50 years of age) with
a female to male prevalence ratio of 9:1.
Global
Data estimates the drug sales for Sjögren’s in 2014 were approximately $1.1 billion across the markets covered in its
forecast. By the end of the forecast period of 2024, sales are estimated to grow to $2.2 billion across the markets covered in
its forecast with a Compound Annual Growth Rate of 7.2%. The market size estimate in 2014 includes Salagen (pilocarpine) and Evoxac
(cevimeline), the only two agents to ever be approved for Sjögren’s, and the use of off-label agents, such as biologics
approved for other autoimmune diseases, and systemic and topical immunosuppressants and corticosteroids. This growth is expected
to be driven by the anticipated approval of Orencia for use in patients with Sjögren’s in the US and EU in 2021 and
Japan in 2022.
LO2A
License Agreement
The
following summary of the LO2A License Agreement as well as all summaries of agreements provided herein are qualified to the full
text of the agreements, which are filed as exhibits hereto.
In
May 2015, Wize Israel entered into the LO2A License Agreement with Resdevco, a company controlled by Professor Shabtay Dikstein,
the inventor of LO2A. Pursuant to the LO2A License Agreement, Resdevco granted to Wize Israel (and thereafter, to OcuWize Ltd.
(“OcuWize”), Wize Israel’s wholly owned subsidiary, as described below) an exclusive license to develop in the
United States, Israel and Ukraine, under the LO2A licensed technology, products in the field of ophthalmic disorders, and to mutually
agree upon a manufacturer and to purchase, market, sell and distribute LO2A in finished product form in the Licensed Territories
in the field of ophthalmic disorders. Subject to certain limited exceptions, Wize Israel may not sublicense or sell or transfer
any of its rights under the LO2A License Agreement without the advance written approval of Resdevco.
The
LO2A License Agreement grants Wize Israel the right to add additional territories in the future, subject to a commitment by Wize
Israel to pay minimum royalties according to a formula set forth in the LO2A License Agreement with respect to the additional
territory, and provided that Resdevco has not granted exclusive rights in such additional territory or is in ongoing negotiations.
The LO2A License Agreement also grants Wize Israel the right to purchase Resdevco’s agreements with its existing distributors
of LO2A in other jurisdictions (namely, Germany, Hungary, Netherlands and Switzerland (collectively, the “Reserved Territories”)
for ten times the greater of the net royalties received in the previous 12 months under such agreements or the minimum royalty
payment under such agreements. The LO2A License Agreement furthermore grants Wize Israel a right of first negotiation with potential
distributors to whom Resdevco may in the future grant distribution rights to LO2A outside of the Reserved Territories and the
Licensed Territories and provides that if Wize Israel enters into such distribution agreement in accordance with the LO2A License
Agreement, then Wize Israel has agreed to guarantee in writing to Resdevco that it will pay to Resdevco minimum royalties according
to a formula set forth in the LO2A License Agreement. The LO2A License Agreement historically included an option to purchase all
remaining territories for a fixed amount and such option was cancelled on March 30, 2017.
The
LO2A License Agreement provides that Wize Israel is required to pay to Resdevco certain royalties for sales in the Licensed Territories
based on an agreed-upon price per unit of (i) $0.60 in Israel and Ukraine, (ii) the low single digits of US Dollars, in China,
and (iii) for sales in additional territories and in the United States, the higher of $0.60 and a percentage of net sales (not
to exceed ten percent) for the duration of the local distribution agreement signed separately with each local distributor, which
royalties, as applicable, are subject to making certain minimum royalty payments, which (1) with respect to the United States,
means the non-refundable and non-deductible aggregate amount of $400,000 over a period of three years commencing from 2015 (which
amount was already fully paid by Wize Israel) and an advance against royalties of $475,000 per year starting January 1, 2018 (which
Resdevco agreed to reduce to $150,000 for January 1, 2018 and January 1, 2019, with the understanding that if Wize Israel obtains
an FDA marketing license in 2019, then Wize Israel will pay Resdevco the remaining 2019 payment of $325,000 within 30 days of
the receipt of such FDA license), which annual advance shall be credited towards any royalties payable to Resdevco for that particular
year, (2) with respect to Israel, means an upfront non-refundable and non-deductible payment of $30,000, payable at commencement
of local sales, and an annual advance against royalties starting January 1, 2017 in increasing payments depending on the year
(up to a maximum of $36,000) which annual advance shall be credited towards any royalties payable to Resdevco for that particular
year, and (3) with respect to Ukraine, means an annual advance against royalties, starting in 2016, in increasing payments depending
on the year (up to a maximum of $30,000), which yearly advance shall be credited towards any royalties payable to Resdevco for
that particular year.
On
January 5, 2017, Wize Israel and Resdevco entered into an amendment to the LO2A License Agreement, pursuant to which the payment
of $150,000 that Wize Israel was obligated to pay to Resdevco on January 1, 2017, was postponed to March 31, 2017. On March 30,
2017, Wize Israel and Resdevco entered into a second amendment to the LO2A License Agreement, pursuant to which the payment of
$150,000 was further postponed to May 31, 2017. In the end of May 2017, the parties agreed to postpone the aforementioned payment
to the beginning of July 2017, when the payment was made. In the end of December 2017, Resdevco notified Wize Israel that the
minimum royalty payment with respect to the United States would be postponed until January 20, 2018 and in January 2018, Resdevco
agreed to postpone such payment until July 29, 2018.
The
LO2A License Agreement has an initial term of seven years that expires in May 2022, and, unless Wize Israel provides prior notice
of at least 12 months terminating the agreement, the LO2A License Agreement renews automatically each year. Wize Israel may terminate
the LO2A License Agreement prior to May 2022 upon 180 days prior notice; provided that all payments previously made to Resdevco
shall be non-refundable, any payments due during the 180 day notice period shall be payable to Resdevco and Wize Israel is required
to pay a penalty of $100,000, depending on the timing of termination. Additionally, if Wize Israel terminates the LO2A License
Agreement, it is required to exert reasonable best efforts to find a third party willing to sell LO2A under the same terms as
the LO2A License Agreement. The LO2A License Agreement may be terminated by either party upon the occurrence of certain other
customary termination triggers, including material breaches of the LO2A License Agreement by either party, as well as the right
of Resdevco to terminate the LO2A License Agreement (or halt the manufacturing agreement or cease delivery of any finished product
for any period of time) as a result of Wize Israel not paying all royalties due under the LO2A License Agreement. In addition,
Resdevco may terminate the LO2A License Agreement, upon 30 days written notice, if (1) an application for the marketing approval
of LO2A, for the treatment of DES is not submitted to the FDA or the equivalent regulatory authority in the Licensed Territories
by May 1, 2019, (2) such FDA approval is not obtained from the FDA or the equivalent regulatory authority in the Licensed Territories
by May 1, 2021, (3) such approval has been obtained, commercial sales of LO2A have not commenced within three months thereafter,
(4) commercial sales of LO2A have commenced, any royalties, including any minimum royalties are not timely paid, or (5) Wize Israel
attempts to sell competing products in or outside the Licensed Territory. Resdevco may also terminate the LO2A License Agreement
if Wize Israel contests the validity of any patents covering LO2A or any related know-how or if Wize Israel makes, sells or exploits
a competing product to LO2A.
The
LO2A License Agreement contains other provisions, including representations and warranties of the parties, reporting, confidentiality
and other covenants, such as an undertaking by Wize Israel not to sell competing products in the Licensed Territories during the
term of the agreement and for five years thereafter. The LO2A License Agreement further provides that any improvements or modifications
made by Wize Israel to LO2A or any related intellectual property or know-how shall belong to Resdevco and Wize Israel shall receive
a license to distribute and sell the same in the Licensed Territories on the same terms set forth in the LO2A License Agreement.
In
order to secure Wize Israel’s obligations and performance pursuant to Convertible Loans made by Rimon Gold, Wize Israel’s
rights under the LO2A License Agreement serve as collateral. For details related to those security interests, see “MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” beginning on page 64
of this prospectus.
In
August 2016, Resdevco granted Wize Israel an option to purchase its ownership rights to LO2A, including the patents and trademarks
thereunder, except in countries in which LO2A is already sold by Resdevco. In accordance with the terms of this option, Wize Israel
was required to pay for such ownership rights a non-recurring payment of $440,000 as well as royalties from future sales of LO2A
and to issue an option to purchase 41,667 of its ordinary shares. This option expired on December 31, 2016 and Wize Israel and
Resdevco are currently negotiating the terms of a new option for Wize Israel to purchase certain rights of LO2A.
In
August 2016, Wize Israel and Resdevco also entered into an agreement pursuant to which Wize Israel assigned all of its rights
and obligations under the LO2A License Agreement to OcuWize.
On
September 6, 2017, Resdevco granted to Wize Israel, sole rights to commercialize LO2A in China. By agreement dated September 25,
2017, Wize Israel and Resdevco agreed that Wize Israel’s sole rights to commercialize LO2A in China shall be limited to
one year if by September 6, 2018, Wize Israel has not signed a distribution agreement for LO2A in China. On May 31, 2018, we entered
into the Chinese Distribution Agreement (as defined below), pursuant to which the Chinese Distributor will distribute LO2A in
China. As a result of us entering into the Chinese Distribution Agreement, Wize Israel’s sole rights to commercialize LO2A
in China shall not be limited to one year. See “BUSINESS — Marketing, Sales and Distribution,” beginning on
page 31 of this prospectus.
On
December 26, 2017, Wize Israel, entered into an amendment to the LO2A License Agreement (the “Third Amendment”). The
Third Amendment includes: (i) China in the list of Licensed Territories, (ii) the commercial terms of the parties with respect
to the activities of Wize Israel in China, including the minimum annual royalty payments from Wize Israel to Resdevco, and, (iii)
an undertaking by Wize Israel to include in the distribution agreement to be entered into with the Chinese Distributor that the
Chinese Distributor will transfer the Chinese market license to Resdevco upon termination of the distribution agreement. In the
event Wize Israel failed to execute a distribution agreement with the Chinese Distributor by June 1, 2018, the Third Amendment
would have been deemed null, void and of no force. On May 31, 2018, we entered into the Chinese Distribution Agreement (as defined
below). As a result of us entering into the Chinese Distribution Agreement, the term of the Third Amendment did not expire on
June 1, 2018. See “BUSINESS — Marketing, Sales and Distribution,” beginning on page 31
of this prospectus.
On
January 8, 2018, Wize Israel entered into a Memorandum of Understanding (the “MOU”) with Resdevco. Pursuant to the
MOU, Resdevco granted to Wize Israel (and its permitted assignees) an exclusive royalty bearing license to sell and distribute
worldwide (excluding the United States, Israel, Ukraine, Switzerland, Germany, Netherlands and China, the “Additional Territories”),
under the LO2A licensed technology, products in the field of ophthalmic disorders, under the terms and conditions set forth in
the MOU, including the following: (i) the license for each Additional Territory shall be conditional on signing a specific license
agreement for each Additional Territory that shall include the basic terms and conditions set forth in the MOU, including reaching
minimum sales targets in such Additional Territory pursuant to a formula set forth in the MOU; (ii) for each Additional Territory,
both Wize Israel and the local distributor shall be responsible to pay Resdevco a minimum per product fee in accordance with a
formula set forth in the MOU and the agreement with the distributor shall be subject to Resdevco's prior approval (which shall
not be unreasonably withheld); (iii) if Resdevco introduces Wize Israel to a distributor in any Additional Territory, Wize Israel
will enter good faith negotiations with such distributor and, if Wize Israel does not reach an agreement with such distributor,
Resdevco may enter into a distribution agreement with such distributor, in which case, Wize Israel will provide the services it
typically provides to its other distributors in consideration for a portion of the royalties payable to Resdevco; and (iv) the
license granted under the MOU is for an initial term of 5 years and, thereafter, automatically renews for additional terms of
5 years each, subject to full compliance with the terms set forth in the MOU and as long as the LO2A License Agreement is in effect.
The MOU also provides that it shall be in effect until a definitive agreement reflecting the terms of the MOU is executed, which
the parties committed to exercise their best efforts to do within three months.
LO2A
LO2A
is a drug developed by Prof. Dikstein in the 1990s, initially for the treatment of DES, and later on for other ophthalmological
disorders, including CCH and Sjögren’s. LO2A is a sterile, preservative-free, single-dose artificial tear preparation
containing 0.015% sodium hyaluronate (“SH”) as the drug substance. It has been developed as a substitute for natural
tears, in order to lubricate and protect the ocular surface tissues.
SH
is a salt of hyaluronic acid (“HA”). HA is present in the extracellular matrix (“ECM”) of all tissues
and is particularly abundant in vitreous humour, skin, cartilage and the synovial fluid of joints. HA’s long chain molecules
form a filter matrix interspersed with cellular fluids, which provide visco-elastic properties to the tissues. In the eye, endogenous
HA forms a layer over the surface of the cornea. It serves to protect the corneal cells and reduce cell damage; so it is important
in maintaining cell viability.
HA
is an important pericellular and cell-surface constituent and is involved in the regulation of cellular activity through its interaction
with other macromolecules. Recently, nonclinical pharmacological experiments have shown that HA promotes the viability of corneal
cells and corneal epithelial wound healing by direct interaction with cell receptors. It acts as a signaling molecule in the ECM
and is a ligand for specific receptor molecules, notably CD44, a cell surface adhesion molecule found on human corneal cells.
Increased expression of CD44 receptors has been shown to be associated with corneal re-epithelialization. Any disruption of corneal
integrity, as may occur with dry eyes, triggers the re-synthesis of HA and increases cell proliferation. These effects have been
demonstrated to be dose-dependent.
LO2A
eye drops incorporate a high molecular weight SH (1.5-1.65 million Da), which enables it to be effective in solution at a low
concentration. It confers specific physical properties upon a solution. Its complex molecular structure, adsorbs a relatively
high volume of water, so that the solution takes on a gelatinous form. This water is released upon an increase in pressure. The
viscosity of high MW SH is affected by shear rate; at high shear rate the macromolecules change their shape, align in the treatment
of flow and its viscosity decreases. This enables the LO2A solution to flow across the corneal surface immediately after blinking.
The physiochemical property of SH is similar to that of mucin, which constitutes the base layer of the lacrimal film and interacts
strongly with the corneo-conjunctival surface. Molecules of mucin are able to bind water molecules up to 80 times greater in weight
than their own. This is due to a large number of negatively-charged glycoside groups that are attached to the terminal section
of the polypeptide skeleton.
All
excipients included in LO2A eye drops comply with the relevant monographs of the European Pharmacopoeia. None of the excipients
are of animal or human origin. They are established excipients for pharmaceutical products, including those approved for ocular
use. Their functions include adjusting tonicity and increasing the viscosity of the formulation. This allows the LO2A eye drops
to have a lubricating effect that is compatible with the external ocular environment. The visco-elasticity of LO2A eye drops ensures
that they are retained on the corneal surface for a period of 4-6 hours, as demonstrated in a Phase I clinical pharmacology study
conducted with LO2A in the University Hospital of Antwerp, Belgium in 1992. In this Phase I, randomized, blinded, cross-over study,
fluorescence was used to measure pre-corneal retention time in healthy volunteers following a single instillation of LO2A and
placebo (isotonic phosphate buffered saline) both labeled with fluorescein. The study compared the elimination coefficient and
area under fluorescence decay curve for LO2A versus placebo.
LO2A
eye drops do not contain any preservatives. This is an important feature of the formulation as preservatives have a recognized
potential for irritation and sensitization and can damage the ocular surface and the cornea. This is of particular relevance to
patients with symptoms of DES, in whom the corneal surface is already compromised.
The
adverse events reported both from clinical trials of LO2A and from literature reports of different eye drop formulations containing
SH, were minor ocular events which are expected to occur with any ophthalmic formulation. LO2A eye drops are presented in sterile,
unit-dose vials to minimize the risk of infection and contamination.
We
believe that the properties of the LO2A formulation described above make it a suitable candidate for use in a variety of dry eye
indications including those with an inflammatory component. LO2A is currently registered and marketed in Germany and Switzerland
for the treatment of DES, in Hungary for the treatment of DES and CCH and in the Netherlands for the treatment of DES and Sjögren’s.
LO2A is sold under the brand name Hylan
®
in Germany and the Netherlands, Lacrycon
®
in Switzerland,
and Conheal
®
in Hungary. LO2A has been sold by Resdevco through local distributors in these countries for a number
of years. In these countries, the drug is sold in a unit dose format, and is manufactured in Germany and France. We currently
intend to market LO2A as a treatment for DES, CCH and Sjögren’s in the Licensed Territories, and believe that LO2A
for treatment of ophthalmic inflammatory disorders such as CCH and Sjögren’s presents a significant market opportunity.
We
intend to distribute LO2A via local or multi-national distributors, including by cooperation with a major medical company with
means and experience in the end processes of approving and marketing drugs. In order to register LO2A for the treatment of dry
eye patients suffering from CCH and Sjögren’s, we estimate that LO2A will be required to undergo additional clinical
trials in addition to the Phase II and Phase IV clinical trials that we are currently conducting.
The
following paragraphs describe the non-clinical and clinical data upon which approvals were granted.
Non-clinical
data
A
summary of the toxicology studies conducted on LO2A and the drug substance is provided in Table 1 below. The acute and sub-acute
toxicity studies conducted with the drug substance and LO2A demonstrated a low order of toxicity. This is in-line with published
reports of acute toxicity studies conducted with SH administered to rodents and other species, including beagle dogs. Similarly,
literature reports of sub-acute and chronic toxicity studies conducted in a wide range of species using different exposure routes,
including ocular application, have repeatedly demonstrated that it did not cause significant toxic effects.
The
systemic absorption of SH is clinically negligible and published reproductive and developmental toxicity tests have demonstrated
that it does not cause any teratogenic effects or adverse effects on reproduction. Animal studies have shown that it is secreted
into breast milk after parenteral injection, but no adverse effects were caused in the young.
Ocular
tolerance studies have been conducted with the drug substance and LO2A solution. Sodium hyaluronate was found to cause mild irritation
when applied in powder form to the eyes of rabbits; the signs of irritation were more frequent and more severe in the group that
did not receive eye irrigation immediately after instillation. In such studies, no other macroscopic ocular findings were reported.
A further 28-day study of the primary eye irritation of LO2A solution in rabbits caused mild ocular irritation; all other ocular
and systemic investigations revealed no adverse effects. In both of these studies all signs of irritation had resolved within
48 hours. Application of the concentrated drug substance would be expected to cause a degree of non-specific irritation, by virtue
of its physical presence in the eye.
After
instillation of eye drops, there is inevitably a degree of spillage onto surrounding skin. Therefore, a standard skin sensitization
study was conducted on LO2A. This demonstrated that it had no sensitization potential. This is in-line with published reports
of skin irritation and sensitizing studies conducted in guinea pigs and rabbits.
The
drug substance was shown not to be mutagenic in a bacterial mutation test. Published reports of the chromosome aberration and
mouse micronucleus tests confirm that it is not mutagenic or genotoxic. No carcinogenicity testing has been conducted, but SH
has well-established safety for long-term use.
Table
1: List of Toxicology Studies Performed During the Development of LO2A / Sodium Hyaluronate
Acute
Toxicity
|
Species/Strain
|
|
Route
|
|
Number
of
animals
|
|
Treatment
|
|
Control
|
|
Test
Period
|
|
Tests
conducted
|
|
Deaths
|
|
Other
findings
|
Mouse
ICR
|
|
Oral
|
|
5M/5F
|
|
1500
mg/kg
|
|
|
|
14
days
|
|
Clinical
observation Body Weight
|
|
Nil
|
|
LDLo
> 1500 mg/kg.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-acute
Toxicity
|
New
Zealand Albino Rabbits
|
|
Ocular
|
|
6M/6F
|
|
One
drop LO2A 6x daily to right eye
|
|
One
drop NaCl 0.9% 6x daily to left eye
|
|
28
days
|
|
Clinical
observation Food consumption Body weight Clinical hemistry / Haematology Autopsy / Organ weights / Histology Ocular macroscopic
examination (Draize) Slit Lamp eye examination/visual reflexes
|
|
Nil
|
|
No
abnormalities detected in tests conducted; Ocular examinations showed good tolerance to LO2A.
|
Ocular
Tolerance
|
Japanese
White Albino Rabbits
|
|
Lower
Conjunctival Sac
|
|
9M
|
|
15.7
mg sodium hyaluronate to right eye; in 3 rabbits followed by 30s irrigation with distilled water
|
|
No
treatment to left eye
|
|
96
hours
|
|
Clinical
observation Body weight Ocular macroscopic examination (Draize)
|
|
Nil
|
|
Weak,
reversible irritation observed.
|
Skin
Sensitisation
|
Hartley
Guinea-Pigs
|
|
Induction
(I):Intra-dermal injection + Challenge (C): Topical with closed patch
|
|
40M
|
|
0.05
ml (1.5%)
|
|
Vehicle
(distilled water) Positive control (DNCB) + Vehicle (Olive oil)
|
|
Day
0 (I) - Day 7 (C) + 48hrs
|
|
Body
weight Dermal reaction scores at 24 and 48hr after Challenge
|
|
Nil
|
|
Dermal
reactions noted in DNCB group only.
|
Mutagenicity
in-vitro
|
|
Test
Cells
|
|
Metabolising
System
|
|
Controls
|
|
Dose
|
|
Results
|
Salmonella
typhirium TA: 98, 100, 535, 1537; Escherichia coli WP2 uvrA
|
|
Aroclor-induced
rat liver S9-mix
|
|
Positive:
2-(2-Furyl)-3-(5-nitro-2-furyl)acrylamide, NaN
3
,
N
-Ethyl-
N
’-nitro-
N
-nitrosoguanidine,
9-Aminoacridine, 2-Aminoamthracene and Benz(
a
)pyrene Negative: Purified Water
|
|
62.5
- 1000μg/plate (highest tested concentration due to high viscosity of sodium hyaluronate) Experiment repeated x 2 Cultures
replicated x 2
|
|
Cytotoxic:
No bacteriostatic effect
Genotoxic effect: No significant increase of the number of revertants against negative control
Effect of positive control: High number of revertants.
|
Clinical
Data
A
pivotal clinical trial conducted with LO2A eye drops in six centers in France, is summarized below. There are a further seven
published clinical studies on LO2A, which are also summarized. Six of these studies documented the efficacy of LO2A eye drops
by both the Investigators and the patients. Adverse events and tolerance parameters were also recorded. The remaining study specifically
investigated tolerance parameters after application of LO2A eye drops. No clinical Pharmacokinetics studies have been conducted
for LO2A eye drops. The PK profile of SH is well established. Extensive safety monitoring in both animal and human studies have
shown that, after ocular application, no clinically meaningful systemic absorption is expected.
A
Phase I study was performed at the University of Antwerp, Belgium in 1992 to measure the pre-corneal residence time of LO2A eye
drops versus placebo in healthy volunteers (Study EC-914-1B). This was a single blind study in which 6 healthy volunteers received
a single administration of LO2A eye drops to one eye and placebo to the other eye, both labeled with fluorescein. Variance analysis
(ANOVA) for the area under the fluorescence delay curve demonstrated that LO2A was retained on the corneal surface significantly
longer than placebo eye drops (p=0.048; significance level p=0.05). No adverse events were reported.
Six
Phase II studies were performed. These are described below:
Randomized
Controlled Trial of High Molecular Weight Hyaluronic Acid (LO2A) in DES
This
study was performed in 1992 at the Hospital San Biagio, Domodossola, Italy. The objectives of the study were to evaluate the efficacy
of 30-day treatment with LO2A in reducing the severity of DES, to confirm an optimum dosing schedule for LO2A (3, 4, 6 or 8 drops/day)
and to assess the interference of LO2A with other ocular therapies. One hundred patients with moderate-to-severe DES were randomized
1:1 to treatment (LO2A) or comparator (Hyalistil containing 0.2% SH and the preservative thimerosal at 0.005%). Statistical analyses
were performed using Wilcoxon, Mann-Whitney U test and Chi square test. The significance level was p=0.05.
The
study demonstrated significant improvement in composite score from objective parameters including Schirmer test, fluorescein staining,
TFBUT and Rose Bengal staining (p<0.001 for both treatments using Wilcoxon test), but no significant difference between treatment
groups in the reduction in total scores at Day 30 (p=0.998 using Mann-Whitney U test). For LO2A, a dosing schedule of four applications/day
reduced scores at Day 30 significantly more than lower dosing schedules (p=0.02 using Mann-Whitney U test). There was no significant
difference between 4 applications/day and higher dosing schedules. The number of patients rating tolerance as ‘good’
or above was significantly higher for LO2A (96%) than the comparator (78%)(p = 0.029 using Chi square test). Adverse events were
experienced by two patients in the LO2A group (both “sticky eye”) and 11 patients in the comparator group. There were
no serious adverse events (“SAEs”) or apparent interactions between LO2A and concomitant eye treatments.
Double-Masked,
Crossover Comparison of a New Artificial Tear Preparation containing Hyaluronic Acid (LO2A) and Lacrisol® in DES Treatment
This
study was performed in 1992 at the University of Florence, Italy. The objectives of the study were to compare the efficacy of
LO2A with Lacrisol
®
at reducing the severity of DES and reducing ocular signs and symptoms. Thirty-five patients
with moderate-to-severe DES were treated alternately with LO2A for a 30-day treatment period and then Lacrisol
®
for a further 30-day treatment period. The trial was double-blind and allocation of treatments at Day 0 was randomized. Lacrisol
®
is an eye drop product containing 0.5% Hydroxypropyl Methylcellulose (“HPMC”). Statistical analyses were performed
using Wilcoxon tests. All analyses were performed using two-sided tests and results were considered to be statistically significant
if the p value was less than or equal to 0.05.
This
study demonstrated a statistically significant improvement in mean, objective dry eye score (based on Schirmer test, fluorescein
staining, TFBUT and Rose Bengal staining) following LO2A treatment compared to the Lacrisol
®
group (p<0.001).
The severity of ocular signs and symptoms including redness, burning, foreign body sensation and photophobia was significantly
less following LO2A treatment (p<0.02 for photophobia and p<0.01 for other symptoms). Adverse events were experienced by
4 patients treated with LO2A (two patients with mild burning, one patient with blurred vision and one patient with “thread
sensation”) and 10 patients treated with Lacrisol
®
. There were no SAEs reported.
Double-Masked
Clinical Trial of an Unpreserved Hyaluronic Acid Based Eye Drops (LO2A) in DES
This
study was performed in 1992 at the University of Genoa, Italy. The objective of the study was to compare the efficacy of LO2A
with Lacrisol
®
in reducing the severity of DES and ocular symptoms. Twenty-three patients with moderate to severe
DES applied LO2A to the first eye and Lacrisol
®
(0.5% HPMC) to the second eye. The trial was double-blind and the
treatment regime was five applications/day for 30 days. The recorded data were statistically analyzed by using the Student’s
t test and Mann-Whitney U test. The threshold for clinical significance was p=0.05.
This
study demonstrated that after 30 days of treatment the mean, objective dry eye scores (based on measurement of meniscal thickness,
fluorescein staining, TFBUT and Rose Bengal staining) for LO2A treatment were significantly lower than for Lacrisol
®
treatment for three out of the four tests (p=0.011 for TFBUT [Student t test], p=0.046 for fluorescein staining [Mann-Whitney
U test] and p=0.032 for Rose Bengal staining [Mann-Whitney U test]). The thickness of the lacrimal meniscus did not change significantly
in any patient; however, the range of values recorded at Day 0 (0.1-0.2 mm) was not indicative of pathological changes. The severity
of the ocular symptoms (burning, foreign body sensation and photophobia) was also significantly reduced for LO2A treatment compared
to Lacrisol
®
at Day 30 (p=0.009 for burning, p=0.006 for foreign body sensation and p=0.025 for photophobia using
Mann-Whitney U test). There were no adverse events associated with LO2A treatment.
Clinical
Evaluation of LO2A Eye Drops versus Reference in Patients suffering from DES
This
study was performed in 1992 at the University of Rome “Tor Vergata”, Italy. The objective of the study was to compare
the efficacy of LO2A with eye drops containing 0.5% HPMC in reducing the severity of DES. Sixteen patients were treated with LO2A
or HPMC eye drops. The study was double blind and assessed the treatment of 5 drops/day for 3-4 weeks. The data were statistically
analyzed by comparing the scores obtained by the Wilcoxon test and adopting a significance threshold of p = 0.05. This study demonstrated
that LO2A eye drops had significantly lower scores than HPMC in the fluorescein (p=0.001), TFBUT (p=0.015) and Rose Bengal test
(p=0.007). There was no difference between treatments in meniscal thickness measurements and Schirmer tests. Adverse events were
reported by one patient treated with LO2A (blurred vision). There were no SAEs reported.
Assessment
of Tolerance to LO2A Eye Drops
This
study was performed at the University of Catania, Italy in 1992. The objective of the study was to assess the ocular tolerance
of patients with moderate to severe DES to the application of LO2A drops compared with eye drops containing 0.5% HPMC. Eighteen
patients applied LO2A drops to the first eye and HPMC in the second eye. The study was double-blind and assessed treatment of
4 drops/day for 20 days. This study demonstrated that 11 out of 18 patients (61.1%) experienced no discomfort upon application
of LO2A compared to 1 out of 18 patients (5.6%)) with HPMC eye drops. This difference was found to be highly significant (p=0.0004)
according to chi-squared test (significance level was p=0.05). The subjective symptoms reported at the time of HPMC instillation
included blurred vision (16/18; 89%), foreign body sensation (11/18; 61%), stinging (7/18; 39%), photophobia (2/18; 11%) itching
(1/18; 6%) and pain (1/18; 6%). The subjective symptoms reported at the time of LO2A instillation included foreign body sensation
(5/18; 28%), stinging (4/18; 22%), blurred vision (3/18; 17%) and photophobia (2/18; 11%). No SAEs were reported.
The
Effect of a New Tear Substitute Containing Glycerol and Hyaluronate on Keratoconjunctivitis Sicca
This
study was performed in 1998 at Hadassah University Hospital, Jerusalem, Israel. The objective of the study was to evaluate the
efficacy of LO2A in patients suffering from keratoconjunctivitis sicca compared to their current tear substitute. Twenty-five
patients with a history of dry eye symptoms for at least one year who were using a known tear substitute preparation (containing
either cellulose derivatives or polyvinylpyrolidone plus hydroxyethylcellulose) and had positive Rose Bengal staining were included.
One eye was randomized to topical treatment with LO2A and the other “control” eye to continued treatment with the
pre-existing tear substitute preparation. In the first stage of the study, 15 patients received treatment for one week and in
the second stage, 10 patients received treatment for two weeks. Statistical analysis of the results included the Wilcoxon signed
rank test for comparison between scores for the same eye at different times, and Mann-Whitney test for comparison between scores
of study versus control eyes adopting a significance threshold of p = 0.05.
The
average patient satisfaction score for LO2A was significantly higher compared to the control preparation at 1 week (p=0.0003)
and at 2 weeks (p=0.0232). A highly significant reduction in Rose Bengal staining was demonstrated following one week of treatment
with LO2A (p<0.0001) and the LO2A-treated eyes had significantly less staining compared to control eyes at both one (p=0.021)
and two weeks (p=0.023). The paper did not report any adverse events associated with LO2A treatment.
The
pivotal, Phase III study is described below:
Acceptability
and Efficacy of LO2A Eye Drops vs Gel-Larmes® in Moderate to Severe DES - Clinical Trial Protocol No. EC-921-3
This
study was performed in 1993 at the Hospital Hôtel-Dieu, Paris, France with additional sites in Brest, Montpellier, Limoges,
Lyon and Nice. The objective of this study was to demonstrate the superiority of LO2A to Gel-Larmes
®
(0.3% Carbomer
containing the preservative thimerosal at 0.005%) in improving patient symptoms and to demonstrate equivalence of the study treatments
in reducing the severity of DES. One hundred patients with moderate to severe DES were randomized 1:1 to treatment (LO2A) or Gel-Larmes
®
.
The study assessed treatment of four applications/day for 12 weeks. Differences between the study treatment groups were analyzed
statistically using either the Student’s t test (means) or Chi squared test (percentages). Equivalence between the treatment
groups was tested by comparison of distributions using the Dunett and Gent’s Chi squared test. Probability level was 0.05.
This
study demonstrated that LO2A was significantly superior to Gel-Larmes
®
in improving patient symptoms (p=0.024).
The severity of DES was measured using Schirmer test, fluorescein staining, TFBUT and Rose Bengal staining. A reduction in total
score of ≥4, obtained from these four objective tests, was achieved by 17 patients (left eye) and 23 patients (right eye) in
the LO2A group and by 20 patients (left eye) and 16 patients (right eye) in the Gel-Larmes
®
group, demonstrating
that LO2A and Gel-Larmes
®
were equivalent in improving signs of DES (probability of equivalence: p=0.039 right
eye and p=0.00002 left eye). The number of patients rating tolerance as ‘good’ or above was significantly higher in
the LO2A group compared to Gel-Larmes
®
at all time points (Days 15 - p=0.031; Day 45 -p=0.00006; Day 90 - p=0.0004).
Adverse events were experienced by 10 patients (21.7%) in the LO2A group and 17 patients (36.2%) in the Gel-Larmes
®
group. The adverse events experienced by patients in the LO2A group included inflammatory reaction (2 patients), burning/itching/stinging
sensation (7 patients) and secretions (1 patient). One unrelated SAE was reported in this study (chest pain) in a patient randomized
to the Gel-Larmes
®
group. In conclusion, this study demonstrated that LO2A was significantly better than Gel-Larmes
®
in terms of subjective symptoms and tolerability in treating DES with a treatment regimen of four drops/day for 12 weeks
and equivalent in improving signs of DES.
A
Phase II study was performed at Semmelweis University, Budapest, Hungary between 2012-2013 to assess the efficacy of LO2A eye
drops in patients with severe CCH. Twenty patients with Grade 2 or 3 CCH (according to LIPCOF score), who had previously failed
treatment on a variety of artificial tear preparations, applied LO2A eye drops to both eyes in a single arm, open label study.
Patients applied 4 drops/day for each eye for 3 months. A mean decrease from baseline of one LIPCOF degree was assumed to be clinically
relevant. Statistical comparisons were performed using a paired t-test (TFBUT) or Wilcoxon Signed Rank Test (LIPCOF degree, Oxford
grade and OSDI score) at a two-sided significance level of 5% (p=0.05).
This
study demonstrated that after 3 months, CCH decreased from a mean LIPCOF degree of 2.9±0.4 in both eyes to 1.4±0.6
on the right (median decrease of -2 points, 95% confidence interval (“CI”) from -2.0 to -1.0), and to 1.4±0.7
on the left eye (median decrease of -1 points, 95% CI from -2.0 to -1.0) (p< 0.001 for both sides). The TFBUT increased significantly
after one-month treatment (right eye median increase of 1.1 sec, 95% CI from 0.2 to 1.0 sec; left eye median increase of 0.9 sec,
95% CI from 0.3 to 1.5 sec)(p=0.02 right eye; p=0.004 left eye). The mean Oxford Scheme grade staining decreased significantly
during the entire period of the examination (right eye median decrease of -1.0 grade, 95% CI from -1.0 to -1.0 grade; left eye
median decrease of -1.0 grade, 95% CI from -1.0 to -1.0 grade after three months)(p<0.001 both sides). The subjective complaints
of the patients measured with the OSDI questionnaire showed a significant improvement after 3 months’ treatment (median
decrease of -13.1 scores, 95% CI from -25.0 to -8.3 scores)(p<0.001). During the study period, two patients complained of a
greasy sensation on their eyelids, but they did not stop the treatment. No other adverse reactions were reported.
Based
on the results of this trial, the Hungarian health authorities approved the amendment of the LO2A labeling to include the treatment
of DES patients suffering from CCH, and patents were filed in the United States, Israel and Japan for the use of the active component
of the drug for treating CCH.
A
further Phase II study was performed at Semmelweis University, Budapest, Hungary in 2016. This study explored the safety and efficacy
of LO2A in patients with moderate severity dry eye associated with Sjögren’s where the ocular surface showed Lissamine
Green staining causing marked subjective symptoms using the OSDI questionnaire. Twenty-one patients applied LO2A eye drops to
both eyes in a single arm, open label study. Patients applied 4 drops a day to each eye for 3 months. LIPCOF score, Lissamine
Green staining, tear production and OSDI questionnaire were measured. The study demonstrated a reduction in the LIPCOF score,
a decrease in Lissamine Green staining according to the Oxford scale and mitigation of subjective symptoms of dry eye according
to the OSDI questionnaire. However, there was no change in tear production during the study.
We
are evaluating such information and are considering the potential consequences on our business. In addition, we plan to use the
clinical results and approval received in the Netherlands the treatment of Sjögren’s to assist our Company in the registration
of LO2A as a treatment for Sjögren’s in the Licensed Territories.
Our
Clinical Trial
s
We
have finished a Multi-Center Trial at five different centers in Israel that commenced in August 2016. The Multi-Center Trial is
a Phase II randomized, double-blind, placebo-controlled study carried out in parallel groups that is evaluating the safety and
efficacy of LO2A for patients suffering from moderate to severe CCH. The trial completed enrollment of all 62 patients on March
26, 2018, with the treatment time for each patient being 3 months. The primary efficacy endpoint for this study is the change
from baseline in lissamine green conjunctival staining score at 3 months; secondary endpoints include change from baseline in
lissamine green conjunctival staining score at 1 month, change from baseline in LIPCOF score at 1 and 3 months, change from baseline
in TFBUT at 1 and 3 months and change from baseline in OSDI questionnaire score at 1 and 3 months. Safety endpoints include adverse
events recorded throughout the trial, best-corrected visual acuity, slit lamp biomicroscopy findings, undilated fundoscopy findings
and intraocular pressure measurements. We consulted with ophthalmology consultants from the United States in the preparation of
the protocol for the Multi-Center Trial.
It
is envisioned that the clinical study required for approval in Israel will be of a similar design to the Multi-Center Trial, but
appropriately powered to demonstrate clinical significance according to the treatment effect observed in the current study. We
will consult with the Israel Ministry of Health before a registration study to confirm acceptability of the efficacy endpoints.
The
comprehensive cost of the Multi-Center Trial is estimated at $850,000. As of November 14, 2018, the Multi-Center Trial had completed
treatment of all of the planned 62 patients, with the treatment time for each patient being three months. 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.
On
October 26, 2017, Wize Israel announced the termination of its Single Center Trial. The Single Center Trial was a Phase II, randomized,
double-blind, placebo-controlled, pilot study carried out in parallel groups that was intended to evaluate the safety and efficacy
of LO2A for patients suffering from moderate to severe CCH, with Wize Israel having sole access to the trial data. On October
24, 2017, Wize Israel received notice from the contract research organization that manages and supervises Wize Israel’s
clinical trials, that an inadequate amount of quality information may be derived from the results collected thus far, given that
there is no correlation in the reaction of both eyes to LO2A, in contrast to professional literature and other trials. In addition,
the recruitment rate of patients was less than required and there was a higher than expected dropout rate. In light of the above,
the CRO concluded that the results of the trial would be of no use even if the trial continued until the end of its term. Based
on the CRO’s conclusion, Wize Israel determined to terminate the trial and to save the future costs that would be incurred
in connection with such trial.
In
February 2018, we received Institutional Review Board (IRB) approval for the protocol of our planned Phase IV Study, which is
a randomized, double-masked, study of LO2A versus Alcon’s Systane
®
Ultra UD, an over-the-counter lubricant
eye drop product used to relieve dry and irritated eyes. The Phase IV Study will take place 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. The primary efficacy endpoint for this study is change from baseline in corneal
and conjunctival staining score at 3 months. Secondary efficacy endpoints include change from baseline in corneal and conjunctival
staining score at 1 month, change from baseline in eye dryness score (visual analogue scale) at 1 and 3 months and change from
baseline in OSDI questionnaire score at 1 and 3 months. Safety will be evaluated by collection of adverse event data throughout
the study, best-corrected visual acuity and slit lamp biomicroscopy findings.
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, Ukraine and Israel. We enrolled our first patient in the Phase IV Study in the
end of March 2018. Data obtained from this study will be submitted to the Israel Ministry of Health and will be included in the
clinical data package submitted during interactions with the FDA. The study is considered necessary as the existing clinical data
in this indication is considered of insufficient quality for submission to the regulatory agencies mentioned above.
Research
and development expenses for the year ended December 31, 2017 were approximately $450,000, for the year ended December 31, 2016
were approximately $240,000 and for the nine period ended September 30, 2018 were approximately $521,000.
Raw
Materials and Suppliers
We
believe that the raw materials that would be required to manufacture LO2A are widely available from numerous suppliers and are
generally considered to be generic industrial chemical supplies.
Manufacturing
There
can be no assurance that LO2A can be manufactured in sufficient commercial quantities, in compliance with regulatory requirements
and at an acceptable cost. We and our contract manufacturers are, and will be, subject to extensive governmental regulation in
connection with LO2A. We and our manufacturer must ensure that all of the processes, methods and equipment are compliant with
both cGMP, and current Good Laboratory Practices for drugs on an ongoing basis, as mandated by the applicable regulatory authorities,
and conduct extensive audits of vendors, contract laboratories and suppliers. We have entered into agreements with a manufacturer
in Germany relating to the manufacturing of LO2A. We have completed the production of LO2A for purposes of our ongoing Phase II
clinical trial and expect to begin production for commercial use only after obtaining the requisite regulatory approvals in Israel
and Ukraine to market LO2A and receive orders from the distributors (for more information, see “—Marketing, Sales
and Distribution” below).
Marketing,
Sales and Distribution
We
plan to engage local or multinational distributors to handle the distribution of LO2A. In particular, we intend to enter into
agreements with pharmaceutical companies with relevant marketing capabilities in the field of pharmaceuticals in order to have
them distribute and sell LO2A in the Licensed Territories. To date, we have entered into exclusive distribution agreements in
Israel to market LO2A for the treatment of DES, and in Ukraine for the treatment of DES. The registration process in certain
countries, including the United States, requires us to undertake additional clinical trials, in addition to the Phase II and Phase
IV clinical trials that we are currently conducting. In August, 2015, LO2A received the approval of the Israel Ministry of Health
for use in Israel as a medical preparation for the treatment of DES, under the brand name “Eyecon®”. Registration
of LO2A was submitted in Ukraine by the Ukrainian distributor for use in Ukraine as a medical preparation for the treatment of
DES, under the brand name “Conheal®”. The registration in Ukraine is conducted by the Ukrainian distributor
and at the present time we cannot provide an estimate as to expected date of completeion. In July 2017, we received our first
order from the distributor in Israel, for an immaterial amount.
On
November 3, 2017, Wize Israel entered into a framework agreement with the Chinese Distributor, whereby, subject to the negotiation
and execution of a detailed distribution agreement and obtaining necessary regulatory approvals in China, the Chinese Distributor
will act as exclusive distributor in China of LO2A. The framework agreement includes, among other things, minimum purchase obligations
of the Chinese Distributor, which Wize Israel estimated to range, over the five-year period of the contemplated agreement, between
$22.5 million to $39 million. The Chinese Distributor plans to import LO2A from one of the existing European countries, most likely
Hungary, and thus the indications shall include DES and any additional indication already approved in the specific European country.
If such indications are imported from Hungary, the indications would include DES and CCH. Clinical trials in China may be required
by the China Food and Drug Administration (“CFDA”) as part of the regulatory requirements for approving LO2A in China.
At this stage it is not certain whether such clinical trials will be required.
On
May 31, 2018, we entered into an Exclusive Distribution Agreement with the Chinese Distributor (the “Chinese Distribution
Agreement”). Pursuant to the terms of the Chinese Distribution Agreement, Wize Israel has granted to the Chinese Distributor
the exclusive right to sell and distribute LO2A Lacrycon® formula products (manufactured by Pharma Stulln GmbH) in the mainland
of China (excluding Hong Kong, Macau and Taiwan) subject to certain terms and conditions. Pursuant to the Chinese Distribution
Agreement, the the Chinese Distributor will be responsible for all necessary regulatory approvals, registration procedures, licenses,
permits and authorizations required for the marketing, importation, sale and service of LO2A in China. Wize Israel will assist
the the Chinese Distributor in completing clinical trials, if such needed. Pursuant to the Chinese Distribution Agreement, the
Chinese Distributor has the option of designating certain affiliates, dealers, distributors, medical institutions and other parties
(the “Designated Entities), however the Chinese Distributor will remain fully liable for the activities or omissions of
any such Designated Entities. Wize Israel is required, among others, to (i) utilize best efforts to obtain certain approvals with
respect to Sjögren’s, DES and CCH, (ii) obtain a valid patent registration for the Uni-dose Products and the Multi-dose
Products with respect to certain indications and (iii) obtain certain marketing approvals in Hungary, among other things. The
Chinese Distribution Agreement includes certain product pricing terms and minimum binding order quantities. The Chinese Distribution
Agreement has an initial term of 5 years and, thereafter, automatically renews for additional terms of 5 years each, subject to
full compliance with the terms of the Chinese Distribution Agreement.
We
intend to engage 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 countries where we may expedite the
registration process of LO2A based on existing knowledge and studies previously conducted on LO2A, without requiring additional
studies. In this respect, we have been studying the possibility of marketing LO2A for DES treatment only in the United States,
but have not made any determinations regarding the best route that can be used to obtain FDA approval to market LO2A. Currently,
we intend to approach the FDA as part of our preliminary request procedure (Pre-IND) and discuss possible alternatives for approving
LO2A for treating DES in the United States. However, as this FDA process is both time consuming and costly, we do not intend to
approach the FDA on a Pre-IND basis until we are able to secure additional funding.
Competition
The
pharmaceutical industry is characterized by rapidly evolving technology, intense competition and a highly risky, costly and lengthy
research and development process. Adequate protection of intellectual property, successful product development, adequate funding
and retention of skilled, experienced and professional personnel are among the many factors critical to success in the pharmaceutical
industry. We operate in markets featuring competition between competing manufacturers in the field of DES treatment, while, to
our knowledge, no therapy is currently approved specifically for Sjögren’s or CCH.
The
global DES market features three particularly dominant companies, which are responsible for an estimated 82% of all revenues:
Novartis/Alcon (through its Celluvisc®, Hyalein®, Vismed® and Systane® drugs); Allergan (Restasis®, Refresh®)
and Santen. In July 2016, the FDA approved an additional medicine, Xiidra®, produced by Shire Plc, for the treatment of DES,
and sales began in August 2016.
To
date, no therapeutic agent has received approval specifically for Sjögren’s. Drugs that are used for the symptomatic
relief of ocular signs and symptoms associated with Sjögren’s include cholinergic agonists e.g. Salagen (pilocarpine)
and Evoxac (cevilemine) and the immunomodulatory agent Restasis (cyclosporine). Systemic Immunomodulary treatments, usually for
extra-glandular disease, which may be used include hydroxychloroquine (mild inflammatory symptoms of joints, muscles and skin),
corticosteroids (rare but serious symptoms: vasculitic rash, interstitial lung disease, interstitial nephritis, glomerulonephritis),
immunosuppressive agents e.g. methotrexate, azathioprine, cyclophosphamide (used to treat serious internal organ manifestations)
and biologic agents e.g. rituximab. Corticosteroids and immunosuppressants lead to broad, non-selective immunosuppression often
associated with significant adverse events.
The
pipeline of drugs in development for the indication of Sjögren’s is relatively small with only one product in Phase
III, Orencia, being developed by Bristol-Myers Squibb. There are a number of drugs in Phase I or II stages of development including
AMG/MEDI5872 developed by Amgen, BIIB063 developed by Biogen, CFZ533 and VAY736 developed by Novartis, GSK618960 developed by
GSK, LY3090106 developed by Eli Lilly, MEDI4920 developed by MedImmune, RG7625 developed by Roche, RSLV developed by Resolve Therapeutics
and Actemra developed by the University Hospital of Strasbourg. In addition, there is an ongoing Phase II combination study combining
Benlysta and Rituxan.
We
believe that LO2A has a number of advantages over competing products in the DES and Sjögren’s markets, including LO2A
lacking preservatives, its ability to be used with any contact lenses, its anti-irritant properties and its non-Newtonian viscosity
profile. On the other hand, other drugs on the market, including new drugs under development, may all be competitive to LO2A.
In fact, some of these drugs are well established and accepted among patients and physicians in their respective markets, can
be efficiently produced and marketed, and are relatively safe. Moreover, other companies of various sizes engage in activities
similar to ours. Most, if not all, of our competitors have substantially greater financial and other resources available to them.
Competitors include companies with marketed products and/or an advanced research and development pipeline.
Intellectual
Property
Our
success depends in part on our ability (directly or through Resdevco) to obtain and maintain proprietary protection for LO2A and
its underlying technology and know-how, and to operate without infringing the proprietary rights of others and to prevent others
from infringing such proprietary rights.
The
LO2A composition and use thereof for treating or alleviating DES was covered by US Patent No. 5,106,615, which has expired. Accordingly,
we are currently focusing our marketing and commercial efforts with respect to CCH and Sjögren’s rather than DES, as
more fully described elsewhere in this prospectus. The use of LO2A for treating or alleviating CCH under US Patent No. 8,912,166
has been granted to us under the LO2A License Agreement.
The
use of LO2A for treating or alleviating CCH is protected by the patent family of International Patent Application Publ. No. WO2012150583,
filed on April 5, 2012, assigned to Resdevco, entitled EYE DROPS FOR TREATMENT OF CONJUNCTIVOCHALASIS. Corresponding members include
US Patent No. 8,912,166, Israeli Patent No. 212725, Japanese Patent No. 5957517 and pending European Pat. Appl. 2704747. Granted
patents and patents to issue of this patent family will expire, without extension, in 2032.
The
use of LO2A for treating or alleviating irritation of the eye caused non-infectious diseases, such as Sjögren’s, is
covered by Provisional Patent Application No. 62/467139, filed on March 5, 2017, assigned to Resdevco, entitled EYE DROPS FOR
TREATMENT OF IRRITATION NOT DUE TO INFECTION. Patents to issue based on this provisional application will expire, without extension,
in 2038.
Pursuant
to the LO2A License Agreement, Resdevco has contractually agreed to be responsible for the payment of all relevant fees associated
with the maintenance of its intellectual property rights. The patent positions of biopharmaceutical companies, such as Resdevco
and us, are generally uncertain and involve complex legal and factual questions. Resdevco’s ability to maintain and solidify
its proprietary position for LO2A will depend on its success in obtaining effective claims and enforcing those claims once granted.
There is no certainty that any of Resdevco’s pending patent applications or those pending patent applications that it licenses
will result in the issuance of any patents or that we will obtain rights to any further patents or patent applications. Any issued
patents and those that may issue in the future may be challenged, narrowed, circumvented or found to be invalid or unenforceable,
which could limit our ability to stop competitors from marketing related products or the length of term of patent protection that
we may have for LO2A under the LO2A License Agreement. We cannot be certain that Resdevco was the first to invent the inventions
claimed in its owned or licensed patents or pending patent applications. In addition, our competitors may independently develop
similar technologies or duplicate any technology developed by Resdevco, and the rights granted under any issued patents may not
provide Resdevco or us with any meaningful competitive advantages against these competitors. Please see under “RISK FACTORS
– Risks Related to our Intellectual Property,” beginning on page 5 of
this prospectus.
Environmental
Matters
We
and our manufacturers, distributors and other service providers are subject to various environmental, health and safety laws and
regulations, including those governing air emissions, water and wastewater discharges, noise emissions, the use, management and
disposal of hazardous, radioactive and biological materials and wastes and the cleanup of contaminated sites. We believe that
our business, including those of our service providers, are being operated in compliance in all material respects with applicable
environmental and health and safety laws and regulations. Based on information currently available to us, we do not expect environmental
costs and contingencies to have a material adverse effect on our business. However, significant expenditures may be imposed on
those third party service providers should they be required to comply with new or more stringent environmental or health and safety
laws, regulations or requirements, which may in turn adversely affect us.
Government
Regulations
We
operate in a highly controlled regulatory environment. Stringent regulations establish requirements relating to analytical, toxicological
and clinical standards and protocols in respect of the testing of pharmaceuticals. Regulations also cover research, development,
manufacturing and reporting procedures, both pre- and post-approval. In many markets, especially in Europe, marketing and pricing
strategies are subject to national legislation or administrative practices that include requirements to demonstrate not only the
quality, safety and efficacy of a new product, but also its cost-effectiveness relating to other treatment options. Failure to
comply with regulations can result in stringent sanctions, including product recalls, withdrawal of approvals, seizure of products
and criminal prosecution.
Before
obtaining regulatory approvals for the commercial sale of LO2A or any of our future product candidates, we must demonstrate through
clinical trials that any of our product candidates are safe and effective. Historically, the results from preclinical studies
and early clinical trials often have not accurately predicted results of later clinical trials. In addition, a number of pharmaceutical
products have shown promising results in clinical trials but subsequently failed to establish sufficient safety and efficacy results
to obtain necessary regulatory approvals. We have incurred and will continue to incur substantial expense for, and devote a significant
amount of time to, clinical trials. Many factors can delay the commencement and rate of completion of clinical trials, including
the inability to recruit patients at the expected rate, the inability to follow patients adequately after treatment, the failure
to manufacture sufficient quantities of materials used for clinical trials, and the emergence of unforeseen safety issues and
governmental and regulatory delays. If a product candidate fails to demonstrate safety and efficacy in clinical trials, this failure
may delay development of other product candidates and hinder our ability to conduct related clinical trials. Additionally, as
a result of these failures, we may also be unable to obtain additional financing.
Governmental
authorities in all major markets require that a new pharmaceutical product be approved before it is marketed, and have established
high standards for technical appraisal, which can result in an expensive and lengthy approval process. The time to obtain approval
varies by country and some products are never approved. The lengthy process of conducting clinical trials, seeking approval and
the subsequent compliance with applicable statutes and regulations, if approval is obtained, are very costly and require the expenditure
of substantial resources.
A
summary of the regulatory processes in countries where we are seeking or will seek regulatory approval follow below.
United
States
In
the United States, the Public Health Services Act and the Federal Food, Drug, and Cosmetic Act, as amended, and the regulations
promulgated thereunder, and other federal and state statutes and regulations govern, among other things, the quality, safety and
effectiveness standards for any of our product candidates and the raw materials and components used in the production of, testing,
manufacture, labeling, storage, record keeping, approval, advertising and promotion of our products on a product-by-product basis.
Before
the clinical studies, the FDA requires from the applicants to complete extensive preclinical laboratory tests, drug chemistry,
animal (in vivo), formulation, stability and other studies.
Certain
preclinical tests must be conducted in compliance with good laboratory practice (GLP) regulations. Non-compliance with GLP standard
can, in some cases, lead to invalidation of the studies, requiring them to be replicated. After laboratory analysis and preclinical
testing, a sponsor files an Investigational New Drug (“IND”) application, with the FDA to begin human testing.
The
results of the preclinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part
of an IND application. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day
time period, raises concerns or questions about the conduct of the clinical trial, including concerns that human research subjects
will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns
before the clinical trial can begin. Submission of an IND may result in the FDA not allowing the clinical trials to commence or
not allowing the clinical trials to commence on the terms originally specified in the IND. A separate submission to an existing
IND must also be made for each successive clinical trial conducted during drug development, and the FDA must grant permission,
either explicitly or implicitly by not objecting, before each clinical trial can begin.
Typically,
a manufacturer conducts a three-phase human clinical testing program which itself is subject to numerous laws and regulatory requirements,
including adequate monitoring, reporting, record keeping and informed consent.
Clinical
trials involve the administration of the investigational drug to human subjects under the supervision of qualified investigators.
Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, the parameters
to be used in monitoring safety and the effectiveness criteria to be used. Each protocol must be submitted to the FDA as part
of the IND. An independent institutional review board (“IRB”), for each medical center proposing to conduct a clinical
trial must also review and approve a plan for any clinical trial before it can begin at that center and the IRB must monitor the
clinical trial until it is completed. The FDA, the IRB, or the sponsor may suspend or discontinue a clinical trial at any time
on various grounds. Clinical testing also must satisfy extensive Good Clinical Practice (“GCP”), requirements, including
the requirements for informed consent.
All
clinical research performed in the United States in support of an NDA must be authorized in advance by the FDA under the IND regulations
and procedures described above. However, a sponsor who wishes to conduct a clinical trial outside the United States may, but need
not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an
IND, the sponsor may submit data from the clinical trial to FDA in support of an NDA so long as the clinical trial is conducted
in compliance with an international guideline for the ethical conduct of clinical research known as the Declaration of Helsinki
and/or the laws and regulations of the country or countries in which the clinical trial is performed, whichever provides the greater
protection to the participants in the clinical trial.
In
Phase I, small clinical trials are conducted to determine the safety and proper dose ranges of any of our product candidates.
In Phase II, clinical trials are conducted to assess safety and gain preliminary evidence of the efficacy of any of our product
candidates. In Phase III, clinical trials are conducted to provide sufficient data for the statistically valid evidence of safety
and efficacy and these studies include a large number of participants. The time and expense required for us to perform this clinical
testing can vary and is substantial. We cannot be certain that we will successfully complete Phase I, Phase II or Phase III testing
of any of our product candidates within any specific time period, if at all. Furthermore, the FDA, the IRB responsible for approving
and monitoring the clinical trials at a given site, the Data Safety Monitoring Board, where one is used, or we may suspend the
clinical trials at any time on various grounds, including a finding that subjects or patients are exposed to unacceptable health
risk.
If
the clinical data from these clinical trials (Phases I, II and III) is deemed to support the safety and effectiveness of the candidate
product for its intended use, then we may proceed to seek to file with the FDA an NDA seeking approval to market a new drug for
one or more specified intended uses. We cannot ascertain whether the clinical data will support and justify filing an NDA. Nevertheless,
if and when we are able to ascertain that the clinical data supports and justifies filing an NDA, we intend to make such appropriate
filings.
The
purpose of an NDA is to provide the FDA with sufficient information so that it can assess whether it ought to approve the candidate
product for marketing for specific intended uses. The NDA normally contains, among other things, sections describing the chemistry,
manufacturing, and controls, non-clinical pharmacology and toxicology, human pharmacokinetics and bioavailability, microbiology,
the results of the clinical trials, and the proposed labeling which contains, among other things, the intended uses of the candidate
product.
We
cannot take any action to market any new drug or biologic product in the United States until our appropriate marketing application
has been approved by the FDA. The FDA has substantial discretion over the approval process and may disagree with our interpretation
of the data submitted. The process may be significantly extended by requests for additional information or clarification regarding
information already provided. As part of this review, the FDA may refer the application to an appropriate advisory committee,
typically a panel of clinicians. Satisfaction of these and other regulatory requirements typically takes several years, and the
actual time required may vary substantially based upon the type, complexity and novelty of the product. Government regulation
may delay or prevent marketing of potential products for a considerable period of time and impose costly procedures on our activities.
We cannot be certain that the FDA or other regulatory agencies will approve any of our products on a timely basis, if at all.
Success in early stage clinical trials does not assure success in later-stage clinical trials. Even if a product receives regulatory
approval, the approval may be significantly limited to specific indications or uses and these limitations may adversely affect
the commercial viability of the product. Delays in obtaining, or failures to obtain regulatory approvals, would have a material
adverse effect on our business.
We
may also seek approval under programs designed to accelerate the FDA’s review and approval of NDAs. For instance, a sponsor
may seek FDA designation of a drug candidate as a “fast track product.” Fast track products are those products intended
for the treatment of a serious or life-threatening disease or condition and which demonstrate the potential to address unmet medical
needs for such disease or condition. If fast track designation is obtained, the FDA may initiate review of sections of an NDA
before the application is complete. This “rolling review” is available if the applicant provides and the FDA approves
a schedule for submission to the FDA of the remaining information. In some cases, a fast track product may be approved on the
basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can
be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity
or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability
or lack of alternative treatments. Approvals of this kind, referred to as accelerated approvals, typically include requirements
for appropriate post-approval Phase IV clinical trials to validate the surrogate endpoint or otherwise confirm the effect of the
clinical endpoint.
In
addition, the Food and Drug Administration Safety and Innovation Act, which was enacted and signed into law in 2012, established
a new category of drugs referred to as “breakthrough therapies” that may be subject to accelerated approval. A sponsor
may seek FDA designation of a drug candidate as a “breakthrough therapy” if the drug is intended, alone or in combination
with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates
that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints,
such as substantial treatment effects observed early in clinical development. Drug candidates may also be eligible for “priority
review,” or review within a six-month timeframe from the date a complete NDA is accepted for filing, if a sponsor shows
that its drug candidate provides a significant improvement compared to marketed drugs. Fast track designation, accelerated approval,
breakthrough therapy designation and priority review do not change the standards for approval, but may expedite the development
or approval process. When appropriate, we intend to seek fast track designation, accelerated approval, breakthrough therapy designation
and priority review, as applicable for our drug candidates. We cannot predict whether any of our drug candidates will obtain such
designations or approvals, or the ultimate impact, if any, of such designations or approvals on the timing or likelihood of FDA
approval of any of its proposed drugs.
Even
after we obtain FDA approval, we may be required to conduct further clinical trials (i.e., Phase IV trials) and provide additional
data on safety and effectiveness. We are also required to gain separate approval for the use of an approved product as a treatment
for indications other than those initially approved. Before approving an application, the FDA will inspect the facility or the
facilities at which the finished drug product, and sometimes the active drug ingredient, is manufactured, and will not approve
the drug unless cGMP compliance is satisfactory. The FDA may also inspect the sites at which the clinical trials were conducted
to assess their compliance, and will not approve the drug unless compliance with GCP requirements is satisfactory.
If,
as a result of these inspections, the FDA determines that our facilities do not comply with applicable FDA regulations and conditions
of product approval, the FDA may seek civil, criminal or administrative sanctions and/or remedies against us including the suspension
of our manufacturing operations.
Drugs
may be marketed only for the FDA approved indications and in accordance with the provisions of the approved labeling. Further,
if there are any modifications to the drug, including changes in indications, labeling, or manufacturing processes or facilities,
the applicant may be required to submit and obtain FDA approval of a new NDA or NDA supplement, which may require us to develop
additional data or conduct additional preclinical studies and clinical trials.
We
have currently received no approvals to market our products from the FDA or other foreign regulators, besides Israel and the countries
where LO2A is already marketed by Resdevco.
Post-Marketing
Requirements
Following
approval of a new product, a pharmaceutical company generally must engage in numerous specific monitoring and recordkeeping activities
and continue to submit periodic and other reports to the applicable regulatory agencies, including any cases of adverse events
and appropriate quality control records. Modifications or enhancements to the products or labeling or changes of site of manufacture
are often subject to the approval of the FDA and other regulators, which may or may not be received or may result in a lengthy
review process.
Prescription
drug advertising is subject to federal, state and foreign regulations. In the United States, the FDA regulates prescription drug
promotion, including direct-to-consumer advertising. Prescription drug promotional materials must be submitted to the FDA in conjunction
with their first use. Any distribution of prescription drug products and pharmaceutical samples must comply with the U.S. Prescription
Drug Marketing Act, a part of the U.S. Federal Food, Drug, and Cosmetic Act.
In
the United States, once a product is approved, its manufacture is subject to comprehensive and continuing regulation by the FDA.
The FDA regulations require that products be manufactured in specific approved facilities and in accordance with current good
manufacturing practices, or cGMPs, and NDA holders must list their products and register their manufacturing establishments with
the FDA. These regulations also impose certain organizational, procedural and documentation requirements with respect to manufacturing
and quality assurance activities. NDA holders using contract manufacturers, laboratories or packagers are responsible for the
selection and monitoring of qualified firms, and, in certain circumstances, qualified suppliers to these firms. These firms and,
where applicable, their suppliers are subject to inspections by the FDA at any time, and the discovery of violative conditions,
including failure to conform to cGMPs, could result in enforcement actions that interrupt the operation of any such facilities
or the ability to distribute products manufactured, processed or tested by them.
Healthcare
Laws and Regulations
We
are also subject to various federal, state and international laws pertaining to health care “fraud and abuse,” including
anti-kickback laws and false claims laws. The federal Anti-kickback law, which governs federal healthcare programs (e.g., Medicare,
Medicaid), makes it illegal to solicit, offer, receive or pay any remuneration in exchange for, or to induce, the referral of
business, including the purchase or prescription of a particular drug. Many states have similar laws that are not restricted to
federal healthcare programs. Federal and state false claims laws prohibit anyone from knowingly and willingly presenting, or causing
to be presented for payment to third party payors (including Medicare and Medicaid), claims for reimbursement, including claims
for the sale of drugs or services, that are false or fraudulent, claims for items or services not provided as claimed, or claims
for medically unnecessary items or services.
If
the government or other relevant party were to allege that we violated these laws there could be a material adverse effect on
our stock price. Even an unsuccessful challenge could cause adverse publicity and be costly to respond to, which could have a
materially adverse effect on our business, results of operations and financial condition. A finding of liability under these laws
can have significant adverse financial implications for us and can result in payment of large penalties and possible exclusion
from federal healthcare programs. We will consult counsel concerning the potential application of these and other laws to our
business and our sales, marketing and other activities and will make good faith efforts to comply with them. However, given their
broad reach and the increasing attention given by law enforcement authorities, we cannot assure you that some of our activities
will not be challenged or deemed to violate some of these laws.
European
Economic Area
Although
we are not currently seeking regulatory approval in the European Union (“EU”), we may do so in the future. As such,
a summary of the EU regulatory processes follows below.
A
medicinal product may only be placed on the market in the European Economic Area (the “EEA”), composed of the 28 EU
member states, plus Norway, Iceland and Lichtenstein, when a marketing authorization has been issued by the competent authority
of a member state pursuant to Directive 2001/83/EC (as recently amended by Directive 2004/27/EC), or an authorization has been
granted under the centralized procedure in accordance with Regulation (EC) No. 726/2004 or its predecessor, Regulation 2309/93.
There are essentially three community procedures created under prevailing European pharmaceutical legislation that, if successfully
completed, allow an applicant to place a medicinal product on the market in the EEA.
Centralized
Procedure
Regulation
726/2004/EC now governs the centralized procedure when a marketing authorization is granted by the European Commission, acting
in its capacity as the European Licensing Authority on the advice of the EMA. That authorization is valid throughout the entire
community and directly or (as to Norway, Iceland and Liechtenstein) indirectly allows the applicant to place the product on the
market in all member states of the EEA. The EMA is the administrative body responsible for coordinating the existing scientific
resources available in the member states for evaluation, supervision and pharmacovigilance of medicinal products. Certain medicinal
products, as described in the Annex to Regulation 726/2004, must be authorized centrally. These are products that are developed
by means of a biotechnological process in accordance with Paragraph 1 to the Annex to the Regulation. Medicinal products for human
use containing a new active substance for which the therapeutic indication is the treatment of acquired immune deficiency syndrome,
or AIDS, cancer, neurodegenerative disorder or diabetes must also be authorized centrally. Starting on May 20, 2008, the mandatory
centralized procedure was extended to autoimmune diseases and other immune dysfunctions and viral diseases. Finally, all medicinal
products that are designated as orphan medicinal products pursuant to Regulation 141/2000 must be authorized under the centralized
procedure. An applicant may also opt for assessment through the centralized procedure if it can show that the medicinal product
constitutes a significant therapeutic, scientific or technical innovation or that the granting of authorization centrally is in
the interests of patients at the community level. For each application submitted to the EMA for scientific assessment, the EMA
is required to ensure that the opinion of the Committee for Medicinal Products for Human Use (“CHMP”), is given within
210 days after receipt of a valid application. This 210 days period does not include the time that the applicant to answer any
questions raised during the application procedure, the so-called ‘clock stop’ period. If the opinion is positive,
the EMA is required to send the opinion to the European Commission, which is responsible for preparing the draft decision granting
a marketing authorization. This draft decision may differ from the CHMP opinion, stating reasons for diverging for the CHMP opinion.
The draft decision is sent to the applicant and the member states, after which the European Commission takes a final decision.
If the initial opinion of the CHMP is negative, the applicant is afforded an opportunity to seek a re-examination of the opinion.
The CHMP is required to re-examine its opinion within 60 days following receipt of the request by the applicant. All CHMP refusals
and the reasons for refusal are made public on the EMA website. Without a centralized marketing authorization it is prohibited
to place a medicinal product that must be authorized centrally on the market in the EU.
National
Procedure
This
procedure is available for medicinal products that do not fall within the scope of mandatory centralized authorization and are
intended for use in only one EU member state. Specific procedures and timelines differ between member states, but the duration
of the procedure is generally 210 days and based on a risk/efficacy assessment by the competent authority of the member state
concerned, followed by determination of Summary of Product Characteristics (“SmPC”) package leaflet and label text/layout
and subsequently grant of the marketing authorization. Marketing authorizations granted on this basis are not mutually recognized
by other member states.
The
majority of medicines available in the EU were authorized at national level, either because they were authorized before EMA’s
creation or they were not in the scope of the centralized procedure. Each EU Member State has its own national authorization procedures.
If a company wishes to request marketing authorization in several EU Member States for a medicine that is outside the scope of
the centralized procedure, it may use one of the following routes:
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the
mutual-recognition procedure, whereby a marketing authorization granted in one Member State can be recognized in other EU
countries; or
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the
decentralized procedure, whereby a medicine that has not yet been authorized in the EU can be simultaneously authorized in
several EU Member States.
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Mutual
Recognition and Decentralized Procedures
With
the exception of products that are authorized centrally, the competent authorities of the member states are responsible for granting
marketing authorizations for medicinal products placed on their national markets. If the applicant for a marketing authorization
intends to market the same medicinal product in more than one member state, the applicant may seek an authorization progressively
in the community under the mutual recognition or decentralized procedure. Mutual recognition is used if the medicinal product
has already been authorized in a member state. In this case, the holder of this marketing authorization requests the member state
where the authorization has been granted to act as reference member state by preparing an updated assessment report that is then
used to facilitate mutual recognition of the existing authorization in the other member states in which approval is sought (the
so-called concerned member state(s)). The reference member state must prepare an updated assessment report within 90 days of receipt
of a valid application. This report together with the approved SmPC (which sets out the conditions of use of the product), and
a labeling and package leaflet are sent to the concerned member states for their consideration. The concerned member states are
required to approve the assessment report, the SmPC and the labeling and package leaflet within 90 days of receipt of these documents.
The total procedural time is 180 days.
The
decentralized procedure is used in cases where the medicinal product has not received a marketing authorization in the EU at the
time of application. The applicant requests a member state of its choice to act as reference member state to prepare an assessment
report that is then used to facilitate agreement with the concerned member states and the grant of a national marketing authorization
in all of these member states. In this procedure, the reference member state must prepare, for consideration by the concerned
member states, the draft assessment report, a draft SmPC and a draft of the labeling and package leaflet within 120 days after
receipt of a valid application. As in the case of mutual recognition, the concerned member states are required to approve these
documents within 90 days of their receipt.
For
both mutual recognition and decentralized procedures, if a concerned member state objects to the grant of a marketing authorization
on the grounds of a potential serious risk to public health, it may raise a reasoned objection with the reference member state.
The points of disagreement are in the first instance referred to the Co-ordination Group on Mutual Recognition and Decentralized
Procedures (“CMD”), to reach an agreement within 60 days of the communication of the points of disagreement. If member
states fail to reach an agreement, then the matter is referred to the EMA and CHMP for arbitration. The CHMP is required to deliver
a reasoned opinion within 60 days of the date on which the matter is referred. The scientific opinion adopted by the CHMP forms
the basis for a binding European Commission decision.
Irrespective
of whether the medicinal product is assessed centrally, de-centrally or through a process of mutual recognition, the medicinal
product must be manufactured in accordance with the principles of good manufacturing practice as set out in Directive 2003/94/EC
and Volume 4 of the rules governing medicinal products in the European community. Moreover, community law requires the clinical
results in support of clinical safety and efficacy based upon clinical trials conducted in the European community to be in compliance
with the requirements of Directive 2001/20/EC, which implements good clinical practice in the conduct of clinical trials on medicinal
products for human use. Clinical trials conducted outside the European community and used to support applications for marketing
within the EU must have been conducted in a way consistent with the principles set out in Directive 2001/20/EC. The conduct of
a clinical trial in the EU requires, pursuant to Directive 2001/20/EC, authorization by the relevant national competent authority
where a trial takes place, and an ethics committee to have issued a favorable opinion in relation to the arrangements for the
trial. It also requires that the sponsor of the trial, or a person authorized to act on his behalf in relation to the trial, be
established in the community.
There
are various types of applications for marketing authorizations:
Full
Applications
A
full application is one that is made under any of the community procedures described above and “stands alone” in the
sense that it contains all of the particulars and information required by Article 8(3) of Directive 2001/83 (as amended) to allow
the competent authority to assess the quality, safety and efficacy of the product and in particular the balance between benefit
and risk. Article 8(3)(l) in particular refers to the need to present the results of the applicant’s research on (i) pharmaceutical
(physical-chemical, biological or microbiological) tests, (ii) preclinical (toxicological and pharmacological) studies and (iii)
clinical trials in humans. The nature of these tests, studies and trials is explained in more detail in Annex I to Directive 2001/83/EC.
Full applications would be required for products containing new active substances not previously approved by the competent authority,
but may also be made for other products.
Abridged
Applications
Article
10 of Directive 2001/83/EC contains exemptions from the requirement that the applicant provide the results of its own preclinical
and clinical research. There are three regulatory routes for an applicant to seek an exemption from providing such results, namely
(i) cross-referral to an innovator’s results without consent of the innovator, (ii) well established use according to published
literature and (iii) consent to refer to an existing dossier of research results filed by a previous applicant.
Cross-referral
to Innovator’s Data
Articles
10(1) and 10(2)(b) of Directive 2001/83/EC provide the legal basis for an applicant to seek a marketing authorization on the basis
that its product is a generic medicinal product (a copy) of a reference medicinal product that has already been authorized, in
accordance with community provisions. A reference product is, in principle, an original product granted an authorization on the
basis of a full dossier of particulars and information. This is the main exemption used by generic manufacturers for obtaining
a marketing authorization for a copy product. The generic applicant is not required to provide the results of preclinical studies
and of clinical trials if its product meets the definition of a generic medicinal product and the applicable regulatory results
protection period for the results submitted by the innovator has expired. A generic medicinal product is defined as a medicinal
product:
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having
the same qualitative and quantitative composition in active substance as the reference medicinal product;
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having
the same pharmaceutical form as the reference medicinal product; and
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whose
bioequivalence with the reference medicinal product has been demonstrated by appropriate bioavailability studies.
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Applications
in respect of a generic medicinal product cannot be made before the expiry of the protection period. Where the reference product
was granted a national marketing authorization pursuant to an application made before October 30, 2005, the protection period
is either six years or 10 years, depending upon the election of the particular member state concerned. Where the reference product
was granted a marketing authorization centrally, pursuant to an application made before November 20, 2005, the protection period
is 10 years. For applications made after these dates, Regulation 726/2004 and amendments to Directive 2001/83/EC provide for a
harmonized protection period regardless of the approval route utilized. The harmonized protection period is in total 10 years,
including eight years of research data protection and two years of marketing protection. The effect is that the originator’s
results can be the subject of a cross-referral application after eight years, but any resulting authorization cannot be exploited
for a further two years. The rationale of this procedure is not that the competent authority does not have before it relevant
tests and trials upon which to assess the efficacy and safety of the generic product, but that the relevant particulars can, if
the research data protection period has expired, be found on the originator’s file and used for assessment of the generic
medicinal product. The 10-year protection period can be extended to 11 years where, in the first eight years post-authorization,
the holder of the authorization obtains approval for a new indication assessed as offering a significant clinical benefit in comparison
with existing products.
If
the copy product does not meet the definition of a generic medicinal product or if certain types of changes occur in the active
substance(s) or in the therapeutic indications, strength, pharmaceutical form or route of administration in relation to the reference
medicinal product, Article 10(3) of Directive 2001/83/EC provides that the results of the appropriate preclinical studies or clinical
trials must be provided by the applicant.
Well-established
Medicinal Use
Under
Article 10a of Directive 2001/83/EC, an applicant may, in substitution for the results of its own preclinical and clinical research,
present detailed references to published literature demonstrating that the active substance(s) of a product have a well-established
medicinal use within the community with recognized efficacy and an acceptable level of safety. The applicant is entitled to refer
to a variety of different types of literature, including reports of clinical trials with the same active substance(s) and epidemiological
studies that indicate that the constituent or constituents of the product have an acceptable safety/efficacy profile for a particular
indication. However, use of the published literature exemption is restricted by stating that in no circumstances will constituents
be treated as having a well-established use if they have been used for less than 10 years from the first systematic and documented
use of the substance as a medicinal product in the EU. Even after 10 years’ systematic use, the threshold for well-established
medicinal use might not be met. European pharmaceutical law requires the competent authorities to consider among other factors
the period over which a substance has been used, the amount of patient use of the substance, the degree of scientific interest
in the use of the substance (as reflected in the scientific literature) and the coherence (consistency) of all the scientific
assessments made in the literature. For this reason, different substances may reach the threshold for well-established use after
different periods, but the minimum period is 10 years. If the applicant seeks approval of an entirely new therapeutic use compared
with that to which the published literature refers, additional preclinical and/or clinical results would have to be provided.
Consent
to refer to an existing dossier info
Under
Article 10c of Directive 2001/83/EC, following the grant of a marketing authorization the holder of such authorization may consent
to a competent authority utilizing the pharmaceutical, preclinical and clinical documentation that it submitted to obtain approval
for a medicinal product to assess a subsequent application relating to a medicinal product possessing the same qualitative and
quantitative composition with respect to the active substances and the same pharmaceutical form.
Law
Relating to Pediatric Research
Regulation
(EC) 1901/2006 (as amended by Regulation (EC) 1902/2006) was adopted on December 12, 2006. This Regulation governs the development
of medicinal products for human use in order to meet the specific therapeutic needs of the pediatric population. It requires any
application for marketing authorization made after July 26, 2008 in respect of a product not authorized in the European Community
on January 26, 2007 (the time the Regulation entered into force), to include the results of all studies performed and details
of all information collected in compliance with a pediatric investigation plan agreed by the Pediatric Committee of the EMA, unless
the product is subject to an agreed waiver or deferral or unless the product is excluded from the scope of Regulation 1902/2006
(generics, hybrid medicinal products, biosimilars, homeopathic and traditional (herbal) medicinal products and medicinal products
containing one or more active substances of well-established medicinal use). Waivers can be granted in certain circumstances where
pediatric studies are not required or desirable. Deferrals can be granted in certain circumstances where the initiation or completion
of pediatric studies should be deferred until appropriate studies in adults have been performed. Moreover, this regulation imposes
the same obligation from January 26, 2009 on an applicant seeking approval of a new indication, pharmaceutical form or route of
administration for a product already authorized and still protected by a supplementary protection certificate granted under Regulation
EC 469/2009 and its precursor (EEC) 1768/92 or by a patent that qualifies for the granting of such a supplementary protection
certificate. The pediatric Regulation 1901/2006 also provides, subject to certain conditions, a reward for performing such pediatric
studies, regardless of whether the pediatric results provided resulted in the grant of a pediatric indication. This reward comes
in the form of an extension of six months to the supplementary protection certificate granted in respect of the product, unless
the product is subject to orphan drug designation, in which case the 10-year market exclusivity period for such orphan products
is extended to 12 years. If any of the non-centralized procedures for marketing authorization have been used, the six-month extension
of the supplementary protection certificate is only granted if the medicinal product is authorized in all member states.
Post-authorization
Obligations
In
the pre-authorization phase the applicant must provide a detailed pharmacovigilance plan that it intends to implement post-authorization.
An authorization to market a medicinal product in the EU carries with it an obligation to comply with many post-authorization
organizational and behavioral regulations relating to the marketing and other activities of authorization holders. These include
requirements relating to post-authorization efficacy studies, post-authorization safety studies, adverse event reporting and other
pharmacovigilance requirements, advertising, packaging and labeling, patient package leaflets, distribution and wholesale dealing.
The regulations frequently operate within a criminal law framework and failure to comply with the requirements may not only affect
the authorization, but also can lead to financial and other sanctions levied on the company in question and responsible officers.
As
a result of the currently on-going overhaul of EU pharmacovigilance legislation the financial and organizational burden on market
authorization holders will increase significantly, such as the obligation to maintain a pharmacovigilance system master file that
applies to all holders of marketing authorizations granted in accordance with Directive 2001/83/EC or Regulation (EC) No 726/2004.
Marketing authorization holders must furthermore collect data on adverse events associated with use of the authorized product
outside the scope of the authorization. Pharmacovigilance for biological products and medicines with a new active substance will
be strengthened by subjecting their authorization to additional monitoring activities. The EU is currently in the process of issuing
implementing regulations for the new pharmacovigilance framework.
Any
authorization granted by member state authorities, which within three years of its granting is not followed by the actual placing
on the market of the authorized product in the authorizing member state ceases to be valid. When an authorized product previously
placed on the market in the authorizing member state is no longer actually present on the market for a period of three consecutive
years, the authorization for that product shall cease to be valid. The same two three year periods apply to authorizations granted
by the European Commission based on the centralized procedure.
Israel
In
addition to regulations of other countries where we are seeking or will seek regulatory approval, Israeli government regulations
will also govern the development of our product candidates.
Clinical
Testing in Israel
In
order to conduct clinical testing on humans in Israel, special authorization must first be obtained from the ethics committee
and general manager of the institution in which the clinical studies are scheduled to be conducted, as required under the Guidelines
for Clinical Trials in Human Subjects implemented pursuant to the Israeli Public Health Regulations (Clinical Trials in Human
Subjects), as amended from time to time, and other applicable legislation. These regulations also require authorization from the
Israel Ministry of Health, except in certain circumstances, and in the case of genetic trials, special fertility trials and similar
trials, an additional authorization of the overseeing institutional ethics committee. The institutional ethics committee must,
among other things, evaluate the anticipated benefits that are likely to be derived from the project to determine if it justifies
the risks and inconvenience to be inflicted on the human subjects, and the committee must ensure that adequate protection exists
for the rights and safety of the participants as well as the accuracy of the information gathered in the course of the clinical
testing. Since we intend to perform a portion of the clinical studies on certain of our therapeutic candidates in Israel, we will
be required to obtain authorization from the ethics committee and general manager of each institution in which we intend to conduct
our clinical trials, and in most cases, from the Israel Ministry of Health.
Israel
Ministry of Health
Israel’s
Ministry of Health, which regulates medical testing, has adopted protocols that correspond, generally, to those of the FDA and
the EMA, making it comparatively straightforward for studies conducted in Israel to satisfy FDA and the EMA requirements, thereby
enabling medical technologies subjected to clinical trials in Israel to reach U.S. and EU commercial markets in an expedited fashion.
Many members of Israel’s medical community have earned international prestige in their chosen fields of expertise and routinely
collaborate, teach and lecture at leading medical centers throughout the world. Israel also has free trade agreements with the
United States and the European Union.
Ukraine
In
addition to regulations of other countries where we are seeking or will seek regulatory approval, Ukrainian government regulations
may also govern the development of our product candidates.
Registration
Procedure
The
Ukrainian legislation on registration and marketing of the medicinal products has been harmonized with the EU legislation since
2005. The general requirements for documentation and expert evaluation process are fairly close to the European directives, although
there are national requirements which may significantly affect regulatory process.
The
national legislation on registration of the medicinal products is very closely intertwined with the requirements for safety (pharmacovigilance)
and quality management. Therefore, in order to obtain and maintain the Registration Certificate for the finished medicinal product,
the applicant has to:
|
●
|
conduct
state registration by submitting the application to the Ministry of Health of Ukraine and by expert evaluation of the documents
of the registration dossier in the SEC;
|
|
●
|
establish
and maintain the pharmacovigilance system in Ukraine;
|
|
●
|
confirm
or certify the manufacturing compliance with the GMP requirements; and
|
|
●
|
register
the layouts (artworks) of the primary and secondary packaging in the Unified Automated Information System (“UAIS”)
of the State Service of Ukraine on Medicines and Drugs Control (“SMDC”).
|
Both
a resident and a non-resident of Ukraine (for example, the manufacturer himself) may act as a Marketing Authorization Holder (“MAH”)
for registration. In accordance with the law it is the MAH who has responsibility for the quality, safety and efficacy of the
medicinal product during marketing within the territory of Ukraine. If the MAH and the manufacturer are different entities, it
is necessary to include the documentation clarifying association between them in the registration materials.
A
non-resident MAH does not have to establish a local representative office or another corporate entity within the territory of
Ukraine. However, the MAH is obliged to establish and maintain the pharmacovigilance system in Ukraine, including the necessity
to appoint the local contact person responsible for pharmacovigilance and to appoint the person in Ukraine, who will be responsible
for the medicinal product quality.
Ukraine
Registration Authorities
The
Ministry of Health of Ukraine
(the “MOH”) is the central executive body of the healthcare system. The MOH accepts
the applications for the medicinal product registration and approves decisions on registration by issuing Orders.
The
State Expert Center of the Ministry of Health of Ukraine
examines the registration dossiers during registration procedure
and supervises the medicinal products safety (pharmacovigilance).
The
SMDC
implements the state policy on quality control of the medicinal products and medical devices, carries out activities
on recognition (certification) of manufacturing compliance with the GMP requirements.
Application
Documentation and Procedure
The
documentation for the standard new registration procedure consists of the following parts:
|
●
|
Application
for registration, completed according to the national application form;
|
|
●
|
Registration
form (legal and administrative documentation that accompanies the Application);
|
|
●
|
Registration
dossier in Common Technical Document (“CTD”) format, consisting of 5 Modules (Modules 2-5 meet the International
Council for Harmonisation of Technical Requirements for Pharmaceuticals for Human Use (ICH) CTD requirements);
|
|
●
|
Translation
of registration dossier parts into Ukrainian or Russian; and
|
|
●
|
Specific
national documents, namely:
|
|
o
|
QCMs
are the quality control methods for the medicinal product that include the medicinal product composition, release and storage
specifications, detailed method descriptions, data on the manufacturers, packaging description, shelf-life and storage conditions;
|
|
o
|
Instruction
for medical use is the information on use of the medicinal product, which is most often supplied as a leaflet; and
|
|
o
|
Layout
and description of the packaging is the description of the information on the primary and secondary packaging of the medicinal
product.
|
The
registration procedure and the review of application dossier in Ukraine is similar to the EU model. For example, the review of
full dossier takes 210 days. Following the first (initial) registration, the Registration Certificate is issued for a period of
5 years. Not later than 90 days before the end of registration period (5 years), the application for re-registration may be submitted
(the recommended deadline is 10-11 months in advance). After the re-registration, the Registration Certificate of unlimited duration
is issued (unless the MOH decides to conduct an additional re-registration after 5 years for valid reasons related to pharmacovigilance).
For
re-registration significantly fewer documents are required, compared to initial registration. During re-registration the main
focus is on the management of the medicinal product safety, that is, on the documents of the pharmacovigilance system and the
Instruction for medical use of the medicinal product. Before submitting the application for re-registration, it is necessary to
submit separate applications for all of the changes. These submitted applications (changes and re-registration) are examined in
parallel, and independently of each other.
Advertising
and promotion
In
Ukraine, it is allowed to advertise non-prescription (“OTC”) medicinal products only. Advertising the prescription
medicinal products in non-specialized media is prohibited. There are rigorous restrictions regarding the OTC medicinal products
advertising, most of which are described in Article 21 of the Law of Ukraine “On Advertising”, and there are also
other legislative restrictions. The promotion of prescription medicinal products is allowed in specialized publications intended
for medical institutions and doctors, as well as for distribution at seminars, conferences, symposiums on medical topics.
China
Historically
the regulatory environment for the medicinal products in China has been considered a challenging one, due to:
|
●
|
discrepancies
between national and international quality standards;
|
|
●
|
timeframes
for review and approval of new drugs that is longer than in most major countries; and
|
|
●
|
a
lack of capacity of the regulatory bodies that has resulted in a backlog of applications.
|
In
August 2015, the China State Council issued “Opinions on Reforming the Review and Approval System for Drugs and Medical
Devices.” The overarching intention of this initiative was to promote transformation and upgrade of the pharmaceutical industry
and bring marketed products up to international standards in terms of efficacy, safety and quality, so as to better meet the public
needs for drugs. For future NDAs, the CFDA requires applicants to include a clinical trial self-inspection report, which the CFDA
will further review.
Review
Process
In
February 2016, the CFDA initiated a priority review procedure, pursuant to which the following medicinal product categories will
be eligible for the priority review status:
|
●
|
Innovative
drugs not approved anywhere worldwide;
|
|
●
|
Innovative
drugs where there is a plan to transfer the manufacturing site to China;
|
|
●
|
Global
clinical trial application (“CTA”) to China in parallel with the US or EU;
|
|
●
|
Innovative
drugs for HIV/AIDS, viral hepatitis, rare disease(s), malignant tumors and pediatric indications; and
|
|
●
|
Newly
launched generic drugs.
|
After
the CFDA approves the priority review process request, applicants are given priority reviewer resources allocated by the Center
for Drug Evaluation (“CDE”) and additional channels to communicate with and obtain quick feedback from the CDE/CFDA.
Target approval time from submission is within six months.
China
started to implement a pilot program MAH System in ten provinces in 2015. The MAH system will be implemented throughout China
and the Drug Administration Law of China will be amended accordingly. Under such program, a research and development organization
or its personnel can be an MAH. The MAH will be fully responsible for any liability with respect to the drug during the lifecycle.
The parties authorized by the MAH to conduct relevant work, including research and production, will bear liability in accordance
with the law and the applicable agreements. In addition, the MAH will also be required to establish a system to directly report
adverse drug reactions or adverse drug events.
CFDA
has also created a new classification “new to the world”, to replace the previous “new to China” category.
This is based on the global marketing authorization approval status and the location of the manufacturing sites inside or outside
of China. This removes the previous definitions that were based on the specific status in China and aligns classification more
closely to other regulatory agencies.
On
October 10, 2017, the CFDA issued the Decision to Adjust Relevant Items concerning Imported Drug Registration (the “Imported
Drug Decision”). The Imported Drug Decision implemented changes to facilitate the review and approval process for imported
drugs, particularly for innovative imported drugs. Pursuant to the Imported Drug Decision, the CFDA will accept foreign clinical
trial data as part of international multi-center clinical trials. In addition, the Imported Drug Decision provides that an overseas
applicant intending to conduct an international multi-center clinical trial in China can simultaneously conduct a Phase I clinical
trial inside and outside China, which essentially means foreign Phase I clinical trial data can be used for the approval application
of imported drugs.
The
Submission Policy
Previously,
the CFDA required that a foreign-developed drug must be approved in another country, and then proceed to China for NDA/MAA submission.
Even if there is multinational clinical trial (“MNCT”) data in China, the applicant had to wait for the Certificates
of Pharmaceutical Product (“CPP”) from the US, EU or other countries, and only then could there be a second submission
(submission to the CFDA to request clinical trial waiver).
Under
the new policy, there is no need for the CPP. After completing the MNCT with the necessary relevant clinical study report (CSR),
a sponsor can make an NDA/MAA submission to the CFDA without CPP. This means, theoretically, that the China NDA/MAA submission
and approval can be in parallel with (or even precede) the foreign MAA approval. These changes more closely align China to global
standards, processes and timelines and should have a substantial impact on the China local pharmaceutical market and on the global
pharmaceutical industry.
This
new policy is expected to have a strong positive impact on foreign-developed new drug innovators who can have a full clinical
development program inside China, with significantly shortened regulatory review processes. The CFDA marketing authorization approval
can be in parallel with the US, EU or any other country’s approval.
During
2017, the CFDA announced the following policies which may also positively impact the product registration process in China:
|
●
|
Policy
on reform of clinical trial management. The CFDA will no longer accredit clinical sites with GCP. This opens clinical sites
to all qualified hospitals, meaning a likely increase in the number of sites able to manage clinical trials in order to meet
the need of increase of drug and medical device trials in China. The CFDA retains responsibility for site inspections.
|
|
●
|
Policy
on acceleration of drug and medical device registration review process. For medicinal products indicated for serious life-threatening
conditions or for significant unmet medical needs, where early or mid-stage clinical data can predict clinical benefits, the
CFDA will be able to grant a conditional approval to allow early marketing in China, with a defined risk management plan and
commitment to complete required clinical trial(s) based on the CFDA’s review and conclusion. China’s Ministry
of Health will issue a rare disease list for China and set up a rare disease patient registration process. The orphan drug
and medical device manufacturer/applicant can apply for a clinical trial waiver or an agreed decrease in trial subject numbers.
For orphan drugs or medical devices that are already approved outside of China, the CFDA can issue a conditional approval
to allow marketing in China, while the sponsor completes commitment for clinical trial based on the CFDA’s review and
conclusion.
|
In
general, positive changes for China’s regulatory environment are expected to better align China with global regulatory norms
by achieving the following:
|
●
|
Shortening
the new IND and NDA review timeline
. This may reverse the previous reluctance to include China in global studies or programs
because of the long IND timelines.
|
|
●
|
Increasing
transparency and globalization
. The CFDA is encouraging foreign sponsors to undertake global studies in China and recommending
that local clinical sites join global studies to help ensure clinical trial data meet the requirements needed for China and
global registration.
|
|
●
|
Minimizing
the drug lag
. The change in the foreign drug registration process by eliminating the CPP requirement may allow the drug
approval process in China to be in parallel with the US and/or the EU.
|
Other
Countries
In
addition to regulations in the United States, the EU, Israel, Ukraine and China, we may be subject to a variety of other regulations
governing clinical trials and commercial sales and distribution of drugs in other countries. Whether or not our products receive
approval from the FDA or EMA approval of such products must be obtained by the comparable regulatory authorities of countries
other than the United States or European Union before we can commence clinical trials or marketing of the product in those countries.
The approval process varies from country to country, and the time may be longer or shorter than that required for FDA or EMA approval.
The requirements governing the conduct of clinical trials and product licensing vary greatly from country to country.
The
requirements that we and our collaborators must satisfy to obtain regulatory approval by government agencies in other countries
prior to commercialization of our products in such countries can be rigorous, costly and uncertain. In the European countries,
Canada and Australia, regulatory requirements and approval processes are similar in principle to those in the United States. Additionally,
depending on the type of drug for which approval is sought, there are currently two potential tracks for marketing approval in
the European countries: mutual recognition and the centralized procedure. These review mechanisms may ultimately lead to approval
in all European Union countries, but each method grants all participating countries some decision-making authority in product
approval. Foreign governments also have stringent post-approval requirements including those relating to manufacture, labeling,
reporting, record keeping and marketing. Failure to substantially comply with these on-going requirements could lead to government
action against the product, us and/or our representatives.
Related
Matters
From
time to time, legislation is drafted, introduced and passed in governmental bodies that could significantly change the statutory
provisions governing the approval, manufacturing and marketing of products regulated by the FDA or EMA and other applicable regulatory
bodies to which we are subject. In addition, regulations and guidance are often revised or reinterpreted by the national agency
in ways that may significantly affect our business and our therapeutic candidates. It is impossible to predict whether such legislative
changes will be enacted, whether FDA or EMA regulations, guidance or interpretations will change, or what the impact of such changes,
if any, may be. We may need to adapt our business and therapeutic candidates and products to changes that occur in the future.
Seasonality
Our
business and operations are generally not affected by seasonal fluctuations or factors.
Employees
We
currently have one full time employee, Or Eisenberg, our Acting Chief Executive Officer and Chief Financial Officer, and one part
time employee. In addition, our Chief Operating Officer dedicates 80% of his time to us and our Chairman of the Board commits
20% of his time to us, both engaged by us via such persons’ wholly owned services companies. In addition, we engage certain
outside consultants that are, in general, compensated on an hourly basis.
DESCRIPTION
OF PROPERTY
Our
principal executive offices are located at 24 Hanagar Street, Hod Hasharon, Israel, 4527708 where we lease approximately 710 square
feet of office space for annual rent of approximately $18,000. Other than such office lease, we do not own or lease any material
tangible fixed assets. We believe that our existing facilities are suitable and adequate to meet our current business requirements.
In the event that we should require additional or alternative facilities, we believe that such facilities can be obtained on short
notice at competitive rates.
LEGAL
PROCEEDINGS
To
our knowledge, the Israel Securities Authority (the “ISA”) is conducting an administrative inquiry regarding Wize
Israel’s public reports with the ISA in Israel regarding its applicable regulatory path necessary for the marketing of
LO2A for the treatment of DES in the United States. As part of the inquiry, the ISA requested Wize Israel to provide certain
documentation and has also questioned its officers with respect to such reports. Wize Israel and its officers cooperated with
the ISA and, at the ISA’s request, Wize Israel also publicly filed a supplemental report to provide additional
information in connection with the said regulatory path and marketing plans, which we believe contained all the required
information. In October 2018, the Company was informed that the ISA intends to commence administrative enforcement
proceedings against Wize Israel, the Company’s former Chairman and the Company’s Chief Executive Officer in
connection with the foregoing reports, pending a hearing with the ISA staff. The hearing with the ISA staff was recently
held and the ISA is expected to inform the Company in the near future whether it intends to pursue such administrative
enforcement proceedings. Should the ISA determine to pursue such proceedings and while the Company does not believe the ISA
position has any merits, the Company intends, to the extent deemed advisable and cost-effective, to pursue a settlement of
the matter.
The Company cannot give any assurance
as to what remedies or sanctions the ISA may seek, if any.
Except
as described above, we are currently not, and have not been in the recent past, a party to any legal proceedings which may have
or have had in the recent past significant effects on our financial position or profitability. However, we have been in the past,
and may be from time to time in the future, named as a defendant in certain routine litigation incidental to our business.
MANAGEMENT’S
DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You
should read the following discussion and analysis of our financial condition and results of operations together with our audited
annual consolidated financial statements as of December 31, 2017 and December 31, 2016 and unaudited consolidated financial statements
as of September 30, 2018 and accompanying notes appearing elsewhere in this prospectus. This discussion and analysis contains
forward-looking statements that involve risks, uncertainties and assumptions. The actual results may differ materially from those
anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth
under “Risk Factors” and elsewhere in this prospectus. All amounts are in U.S. dollars and rounded.
Overview
We
are a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including DES. We have
in-licensed LO2A, a drug developed for the treatment of DES and other ophthalmological illnesses, including CCH and Sjögren’s.
We
have not generated any revenues from operations since our inception other than immaterial revenue in Israel during the third quarter
of 2018 of $7,000 which were deducted from research and development expenses, 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. Our operating expenses have increased from $1,048,000 in the nine months ended September
30, 2017 to $2,765,000 in the nine months ended September 30, 2018 and from $1,034,000 in the year ended December 31, 2016 to
$1,481,000 in the year ended December 31, 2017. 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.
Wize
Israel was deemed to be the accounting acquirer in the Merger. The consolidated financial statements of Wize Israel included in
this prospectus are as of and for the periods that are prior to the Merger, and have therefore, not been adjusted to reflect the
impact of the Merger.
Results
of Operations
Year
Ended December 31, 2017 Compared to Year Ended December 31, 2016
|
|
Year
Ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
Operating expenses:
|
|
|
|
|
|
|
Research and development
|
|
$
|
450,000
|
|
|
$
|
240,000
|
|
General and administrative
|
|
|
1,031,000
|
|
|
|
794,000
|
|
Total operating costs
|
|
|
1,481,000
|
|
|
|
1,034,000
|
|
Financial expenses, net
|
|
|
1,485,000
|
|
|
|
105,000
|
|
Net loss
|
|
$
|
2,966,000
|
|
|
$
|
1,139,000
|
|
Revenues
We
did not generate any revenues from operations during the years ended December 31, 2017 and 2016. We had no revenues primarily
because (1) from the time of the creditors’ arrangement 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.
Operating
Expenses
Research
and development expenses.
Research and development expenses were $450,000 for the year ended December 31, 2017, compared to
$240,000 for the year ended December 31, 2016, an increase of $210,000 or 87%. The increase in research and development expenses
is primarily related to the royalty expense of approximately $170,000 to Resdevco. For more information with respect to our expenses
in connection with entering into the LO2A License Agreement, please see Note 5 of our audited consolidated financial statements
appearing elsewhere in this prospectus.
General
and administrative expenses.
General and administrative expenses were $1,031,000 for the year ended December 31, 2017, compared
to $794,000 for the year ended December 31, 2016, an increase of $237,000 or 30%. The increase in general and administrative expenses
during these periods is primarily related to increases in professional and legal services of $230,000.
Financial
Expenses, Net
. Financial expenses, net were $1,485,000 for the year ended December 31, 2017 compared to financial expenses,
net of $105,000 for the year ended December 31, 2016, a change of $1,380,000 or 1314%. The increase in financial expenses during
this period is primarily related to increased amortization of the beneficial conversion feature (“BCF”) of $1,000,000,
change in the fair value of derivative liability for Investment Rights of $253,000 (this change resulted in financial income of
$76,000 during the year ended December 31, 2016) and loss from extinguishment of Convertible Loans of $61,000, which extinguishment
loss did not apply in 2016.
Net
Loss
. As a result of the foregoing, we incurred a net loss of $2,966,000 for the year ended December 31, 2017 compared to
a net loss of $1,139,000 for the year ended December 31, 2016, an increase in the net loss of $1,827,000 or 60%.
Nine
Months Ended September 30, 2018 Compared to the Nine Months Ended September 30, 2017
|
|
Nine Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
Research and development
|
|
$
|
(521,000
|
)
|
|
|
(288,000
|
)
|
General and administrative
|
|
|
(2,244,000
|
)
|
|
|
(760,000
|
)
|
Total operating costs
|
|
|
(2,765,000
|
)
|
|
|
(1,048,000
|
)
|
Financial income (expense), net
|
|
|
1,277,000
|
|
|
|
(1,016,000
|
)
|
Net loss
|
|
$
|
(1,488,000
|
)
|
|
|
(2,064,000
|
)
|
Revenues
We
did not generate any revenues from operations during the nine months ended September 30, 2018 other than immaterial revenue in
Israel during the third quarter of 2018 of $7,000 which were deducted from research and development expenses and 2017. We had
no revenues primarily because (1) from the time of the Creditors’ Arrangement 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 the United States, Israel and Ukraine, or in the low single digits of US Dollars, in China, payable
on a semi-annual basis, subject to making certain minimum royalty payments as set forth in the LO2A License Agreement.
Operating
Expenses
Research
and development expenses.
Research and development expenses were $521,000 for the nine months ended September 30, 2018, compared
to $288,000 for the nine months ended September 30, 2017, an increase of $233,000 or 80.9 %. The increase in research and development
expenses is primarily related to additional expenses related to clinical trials. In 2017 all research and development expenses
related to CCH clinical trial, while in 2018 research and development expenses related both to CCH and Sjögren clinical trials.
General
and administrative expenses.
General and administrative expenses were $2,244,000 for the nine months ended September 30, 2018,
compared to $760,000 for the nine months ended September 30, 2017, an increase of $1,484,000 or 195.3%. The increase in general
and administrative expenses during these periods is primarily related to increases in investor’s relationship expense of
$105,000, increase in professional and legal services of $89,000, increase in expenses related to issuance of RSU’s to Company’s
officers and directors of $471,000 and other stock-based compensation expense of $649,000.
Financial
Income (expense), Net
. Financial income (expense), net was $1,277,000 for the nine months ended September 30, 2018 compared
to financial expense, net of $(1,016,000) for the nine months ended September 30, 2017, a change of $2,293,000 or 225.7%. The
decrease in financial expenses during this period is primarily related to the amortization of BCF, proceeds allocated to the derivative
liability and debt issuance costs for convertible loans of $(729,000) during the nine months ended September 30, 2017 compared
to no such expense in 2018, change in the fair value of derivative liability for Right to Future Investment of $(261,000) during
the nine months ended September 30, 2017 compared to no such expense in 2018, and amortization of premium related to convertible
loans of $1,338,000 which we did not have in the nine month period ended September 30, 2017.
Net
Loss
. As a result of the foregoing, we incurred a net loss of $1,488,000 for the nine months ended September 30, 2018 compared
to a net loss of $2,064,000 for the nine months ended September 30, 2017, a decrease in the net loss of $576,000 or 27.9%.
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 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, 2018, December 31, 2017 and December 31, 2016, we had $99,000, $215,000 and $28,000 in cash and cash equivalents,
respectively.
As
of September 30, 2018, December 31, 2017 and December 31, 2016, we had $1,906,000, $3,204,000 and $406,000, respectively, of outstanding
loans (including loans from Wize Israel’s controlling shareholder as of December 31, 2016), including accrued interest and
net of discounts, all of which relates to the Convertible Loans, as described below. However, the aggregate principal amount of
such loans is $1,353,000 (not including interest).
As
of September 30, 2018, December 31, 2017 and December 31, 2016, we had ($2,202,000), ($3,103,000) and ($750,000) of working capital
(deficit), respectively. As of September 30, 2018, we had an accumulated deficit of $27,914,000. The decrease in working capital
deficit was primarily due to the exercise by Ridge Valley Corporation (“Ridge”), Rimon Gold Assets Ltd. (“Rimon
Gold”), Shimshon Fisher (“Fisher”), Simcha Sadan (“Sadan”) of PIPE Warrants and Investment Rights
as more fully described below and due to amortization of premium related to convertible loans.
The
following table presents the major components of net cash flows (used in) provided by operating, investing and financing activities
for the periods presented:
|
|
Year
Ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(1,357,000
|
)
|
|
$
|
(874,000
|
)
|
Net cash used in investing activities
|
|
$
|
(4,000
|
)
|
|
$
|
(1,000
|
)
|
Net cash provided by financing activities
|
|
$
|
1,538,000
|
|
|
$
|
473,000
|
|
|
|
Nine
Months Ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
$
|
(1,378,000
|
)
|
|
$
|
(983,000
|
)
|
Net cash provided by (used in) investing activities
|
|
$
|
267,000
|
|
|
$
|
(2,000
|
)
|
Net cash provided by financing activities
|
|
$
|
995,000
|
|
|
$
|
1,511,000
|
|
Year
Ended December 31, 2017 Compared to Year Ended December 31, 2016
For
the years ended December 31, 2017 and 2016, net cash used in operating activities was $1,357,000 and $874,000, respectively. The
increase in net cash used in operating activities was mainly due to an increase in net loss of $1,837,000 which was partly mitigated
by an increase in derivative liability and debt issuance costs related to Convertible Loans of $1,000,000, by an increase in change
in the fair value of derivative liability for Investment Rights of $329,000, and by an increase in fair value of license purchase
obligations of $146,000.
For
the years ended December 31, 2017 and 2016, net cash used in investing activities was $4,000 and $1,000, respectively.
For
the years ended December 31, 2017 and 2016, net cash provided by financing activities was $1,538,000 and $473,000, respectively.
Cash was provided in 2017 primarily by proceeds of $82,000 that were received from one of the Interim Loans and the net proceeds
of $625,000 that were received from the 2017 Loan Agreement. We (through Wize Israel) received $966,000 of proceeds in connection
with the 2017 PIPE, and $21,000 from the exercise of stock options into common stock. Cash was provided in 2016 primarily by net
proceeds from loans from Wize Israel’s controlling shareholder and from convertible loans. Repayment of the license purchase
obligation partly offset these net proceeds in both 2017 and 2016.
Nine
Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017
For
the nine months ended September 30, 2018 and 2017, net cash used in operating activities was $(1,378,000) and $(983,000), respectively.
The increase in net cash used in operating activities was mainly due to a decrease in net loss of $576,000 and an increase in
stock-based compensation of $1,212,000, which were mitigated by amortization of a premium related to convertible loans of $1,338,000.
For
the nine months ended September 30, 2018 and 2017, net cash used in investing activities was $267,000 and $(2,000), respectively.
The increase in net cash provided by investing activities was mainly due to proceeds from sale of marketable equity securities
of $257,000 and from decrease in restricted bank deposit of $12,000.
For
the nine months ended September 30, 2018 and 2017, net cash provided by financing activities was $995,000 and $1,511,000, respectively.
Cash was provided in the nine months ended September 30, 2018 by proceeds of $995,000 that comprise of payment of license purchase
obligation of $150,000 and $1,145,000 that were received from issuance of shares with respect to exercise of PIPE warrants and
2016 and 2017 right for future investment. On March 26, 2018, Rimon Gold exercised a portion of their 2016 Investment Right (as
defined below) and received 217,442 shares of Common Stock in exchange for approximately $284,000. On March 26, 2018, Ridge exercised
a portion of their 2017 Investment Right (as defined below) and received 213,524 shares of Common Stock in exchange for approximately
$284,000. On March 26, 2018, Sadan exercised a portion of his warrants to purchase (as adjusted based on an exchange ratio of
each ordinary share of Wize Israel issued and outstanding converted into 4.1445791236989 shares of the Company’s Common
Stock (the “Exchange Ratio”)) an aggregate of 904,036 shares of our Common Stock at an exercise price of $1.9728 (the
“PIPE Warrants”), which PIPE Warrants were granted on November 16, 2017 and was issued 144,168 shares of our Common
Stock in exchange for approximately $293,000. On February 22, 2018, we received notices from certain lenders to exercise 2017
Investment Rights to purchase an aggregate of 213,524 shares of Common Stock for approximately $284,000. In April, May and July,
2018, the Company received the aggregate exercise price of approximately $284,000, and in July 2018 the Company issued 213,524
shares of Common stock related to the exercise notice mentioned above. Cash was provided in the nine month period ended September
30, 2017 primarily by proceeds from issuance of units consisting of ordinary shares and detachable warrants, net of issuance costs
of $963,000 and proceeds from issuance of convertible loan, net of issuance costs of $620,000.
Outlook
According
to management estimates, liquidity resources as of September 30 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 (in addition to the October 2018 Privet Placement).
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 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 5
of this prospectus. As of September 30, 2018, we had an accumulated deficit and a stockholders’ deficit. In addition,
during the nine months ended September 30 and the years ended December 31, 2017 and 2016, we reported 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 reports of our independent registered public accounting firm on the audited financial statements
as of and for the year ended December 31, 2017 contain 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 shares that we currently own that are presented as marketable equity securities in our financial statements.
Principal
Financing Activities.
The following is a summary of the equity and debt financings conducted by Wize Israel since the Creditors’
Arrangement:
In
December 2014, an Israeli court approved the Creditors’ Arrangement under the Israeli Companies Law between Wize Israel
(then known as Star Night Technologies Ltd.), its creditors and its shareholders, in which Wize Israel was purchased by a group
of investors led by Ridge. Upon the completion of the Creditors’ Arrangement, all of Wize Israel’s assets, rights
and obligations were transferred to the creditors’ arrangement fund, so that Wize Israel’s equity after the approval
of such arrangement was zero and Wize Israel remained a public shell company without any activity, rights or obligations. The
Creditors’ Arrangement was completed in February 2015. In connection with the Creditors’ Arrangement, on February
15, 2015, Wize Israel issued 692,307 ordinary shares of Wize Israel, in the aggregate, to Ridge, Zarachia, Avner Arazi (“Arazi”)
and Amir Bramli (“Bramli”, and together with Ridge, Zarachia and Arazi, the “2015 Investors”), in exchange
for their purchase of the public shell for NIS 1,800,000 (approximately $463,000). In addition, on April 7, 2015, for no consideration,
the 2015 Investors provided Wize Israel with a capital amount of NIS 4,056,000 (approximately $1,044,000) in cash.
As
of September 30, 2018, we (through Wize Israel) had a total principal and accrued interest balance of approximately $1.4 million
of loans outstanding under the Convertible Loans described below, of which (1) Ridge extended a principal amount of NIS 1.0 million
(approximately $270,000), (2) Rimon Gold extended a principal amount of NIS 3.0 million (approximately $811,000), and (3) Fisher
(not affiliated, to Wize Israel’s knowledge, with Ridge or Rimon Gold) extended a principal amount of NIS 1.0 million (approximately
$270,000). Below is a summary of the material provisions of the Loan Agreements.
The
2016 Loan.
On March 20, 2016, Wize Israel entered into a convertible loan (as amended on March 30, 2016, December 21, 2017
and October 19, 2018, the “2016 Loan Agreement”) with Rimon Gold, whereby Rimon Gold extended a loan in the principal
amount of up to NIS 2 million (approximately $519,000), which bears interest at an annual rate of 4% (the “2016 Loan”).
Pursuant to the 2016 Loan Agreement, as modified by the 2017 Loan Agreement (as defined below) and the 2017 Loan Amendment (as
defined below), both described below, the 2016 Loan has a maturity date (the “New Loan Agreements Maturity Date”)
that shall be the earliest of (a) 90 days following the effectiveness of the registration statement registering for resale the
common stock, conversion shares and warrant shares issued in the Company’s October 2018 Private Placement (as described
below) that are held by holders not parties to the 2017 Loan Amendment, (b) 90 days following the date on which all securities
issued to investors in the October 2018 Private Placement are no longer deemed “registrable securities” under the
registration rights agreement entered into in connection with the October 2018 Private Placement, and (c) one year following the
closing of the October 2018 private placement. In addition, pursuant to the 2017 Loan Amendment, the expiration date of the investment
right under the 2016 Loan Agreement and the 2017 Loan Agreement was amended to be 180 days after the New Loan Agreements Maturity
Date.
Under
the 2016 Loan Agreement, Rimon Gold had the right, at its sole discretion, to convert any outstanding portion of the 2016 Loan,
but not less than NIS 100,000 (approximately $26,000), into Wize Israel ordinary shares at a conversion price per share of NIS
15.2592 (approximately $3.84), subject to adjustments for stock splits and similar events set forth in the 2016 Loan Agreement.
As a result of the Merger and based on the Exchange Ratio, the conversion price per share for the 2016 Loan was adjusted to NIS
3.60 (approximately $0.96). As a result of the 2017 Loan Amendment (as defined below), the aggregate principal amount of the 2016
Loan is $531,067 and the conversion price per share for the 2016 Loan was adjusted to $0.9768.
In
order to secure its obligations and performance pursuant to the 2016 Loan Agreement, Wize Israel recorded a first priority fixed
charge in favor of Rimon Gold on all of Wize Israel’s rights, including its distribution rights, under the LO2A License
Agreement, and a first priority floating charge on all of Wize Israel’s rights, title and interest in all of its assets,
as they may exist from time to time (the agreements relating to such charges being referred to as the “Security Agreements”).
Rimon
Gold is entitled, under certain circumstances, to demand repayment of the 2016 Loan, including among others: (i) if Wize Israel
breaches or fails to perform or is shown to have made a false statement, under the 2016 Loan Agreement or the Security Agreements;
(ii) any failure of Wize Israel to make a timely payment; (iii) upon the appointment of a receiver; (iv) the imposition of a lien
on a material asset of Wize Israel; (v) if Wize Israel files a motion to stay proceedings; (vi) upon the expiration or termination
of the LO2A License Agreement or if any party is in material breach of the LO2A License Agreement or if any party notifies the
other of its intention to terminate the LO2A License Agreement; (vii) an adverse material change; and (viii) upon the non-performance
of Wize Israel pursuant to the 2017 Loan Agreement described below. We believe that we have complied with the aforementioned covenants
through the date of this prospectus.
The
2016 Loan Agreement and the Security Agreements contain a number of other restrictive covenants that limit Wize Israel’s
operating flexibility. These covenants include, among other things, limitations on the creation of liens; on the incurrence of
indebtedness; on dispositions of assets, mergers, acquisitions and other change of control transactions; on changes in the general
nature of Wize Israel’s business; restrictions on payments to related parties; restrictions on conducting rights offerings,
and on the distribution of dividends. We believe that we have complied with the aforementioned covenants through the date of this
prospectus.
In
addition, under the 2016 Loan Agreement, as modified by the 2017 Loan Agreement and the 2017 Loan Amendment, Rimon Gold has the
right, which we refer to as the 2016 Investment Right, until June 30, 2019, to invest up to $796,601, in the aggregate, at an
agreed price per share, which was adjusted based on the Exchange Ratio from NIS 20.4 (approximately $6.00) to NIS 5.04 (approximately
$1.44) and based on the 2017 Loan Amendment, from NIS 5.04 to a fixed price of $1.308 (subject to adjustments in case of stock
splits or similar events). See
“-December 2017 Loan Amendment
” below.
The
2017 Loan
. On January 15, 2017, Wize Israel entered into the 2017 Loan Agreement (as amended on December 21, 2017, and October
19, 2018 the “2017 Loan Agreement”) with Ridge, and, by way of entering into assignments and assumption agreements
following such date, also with Rimon Gold and Fisher (together, the “2017 Lenders”), whereby each of the lenders extended
a loan in the principal amount of up to NIS 1 million (approximately $283,000) and in the aggregate principal amount of up to
NIS 3 million (approximately $850,000), which bears interest at an annual rate of 4% (the “2017 Loan”, and together
with the 2016 Loan, the “Loans”)). Pursuant to the 2017 Loan Agreement and the 2017 Loan Amendment, the 2017 Loan
has a maturity date which is the “New Loan Agreements Maturity Date. In addition, pursuant to the 2017 Loan Amendment, the
expiration date of the investment right under the 2017 Loan Agreement was amended to be 180 days after the New Loan Agreements
Maturity Date.
Under
the 2017 Loan Agreement, each of the 2017 Lenders had the right, at its sole discretion, to convert any outstanding portion of
the 2017 Loan, but no less than NIS 100,000 (approximately $28,000), that the lender provided to Wize Israel (each such portion
converted, the into Wize Israel ordinary shares at a conversion price per share equal to the lower of (1) NIS 24 (approximately
$6.72) and (2) the lowest price per share of Wize Israel in any offering made by Wize Israel following the date of the 2017 Loan
Agreement and through the date of such requested conversion, subject to adjustments for stock splits and similar events set forth
in the 2017 Loan Agreement (the “2017 Loan Conversion Price”). As a result of the 2017 PIPE (as defined below), the
2017 Loan Conversion Price for Rimon Gold, Fisher and Ridge was adjusted to NIS 16.80 (approximately $4.80), and as a result of
the Merger, the 2017 Loan Conversion Price of NIS16.80 (approximately $4.80) was adjusted in accordance with the Exchange Ratio
to NIS 4.05 (approximately $1.15). As a result of the 2017 Loan Amendment, the aggregate principal amount of the 2017 Loan is
$822,144 and the 2017 Loan Conversion Price was adjusted to a fixed price of $1.1112. See
“-December 2017 Loan Amendment
”
below.
In
addition, under the 2017 Loan Agreement, as modified by the 2017 Loan Amendment, the 2017 Lenders have the right, which we refer
to as the 2017 Investment Right, until June 30, 2019, to invest up to $1,233,216, in the aggregate, at an agreed price per share
equal to 120% of the applicable 2017 Loan Conversion Price, which was adjusted based on the 2017 Loan Amendment, to a fixed exercise
price of $1.332 (subject to adjustments in case of stock splits or similar events). See
“-December 2017 Loan Amendment
”
below.
Ridge
is entitled, under certain circumstances, to demand repayment of the 2017 Loan, including: (i) if Wize Israel breaches or fails
to perform or is shown to have made a false statement, under the 2017 Agreement or the Security Agreements; (ii) any failure of
Wize Israel to make a timely payment; (iii) upon the appointment of a receiver; (iv) the imposition of a lien on a material asset
of Wize Israel; (v) if Wize Israel files a motion to freeze proceedings; and (vi) an adverse material change. We believe that
we have complied with the aforementioned covenants through the date of this prospectus.
The
2017 Loan contains a number of restrictive covenants that limit Wize Israel’s operating flexibility. These covenants include,
among other things, limitations on the creation of liens; on the incurrence of indebtedness; on dispositions of assets, mergers,
acquisitions and other change of control transactions; on changes in the general nature of Wize Israel’s business; restrictions
on payments to related parties; and on the distribution of dividends. Wize Israel has complied with the aforementioned covenants
through the date of this prospectus.
It
should be noted that, prior to entering into the 2017 Loan Agreement, Ridge provided the following three loans to Wize Israel,
all of which bore interest at an annual rate equal to the interest rates of the Israeli government bonds: (1) NIS 250,000 was
extended in November 2016, (2) NIS 300,000 was extended in December 2016 and (3) NIS 200,000 was extended in February 2017 (together,
the “Ridge Interim Loans”). On March 30, 2017, after Ridge already provided NIS 250,000 under the 2017 Loan Agreement
out of the NIS 1 million committed by Ridge thereunder, Ridge exercised its right to have the Ridge Interim Loans treated as a
portion of the remaining NIS 1 million.
In
addition, as part of the 2017 Loan Agreement, Wize Israel and the other lenders agreed that (1) the security interests made under
the Security Agreements will also serve to secure the loans made by Rimon Gold under the 2017 Loan Agreement, and (2) Rimon Gold
will have the right to be repaid the full 2016 Loan prior to any repayment of the 2017 Loan.
December
2017 Loan Amendment
. On December 21, 2017, we entered into an amendment (the “2017 Loan Amendment”) to the 2016
Loan Agreement and the 2017 Loan Agreement. Pursuant to the 2017 Loan Amendment, (i) the maturity date of the Loans was extended
from December 31, 2017 to December 31, 2018; (ii) the exercise period of the 2016 Investment Right was amended so that it shall
expire on June 30, 2019; (iii) the exercise period of the 2017 Investment Right was amended so that it shall expire, without the
need to first convert the 2017 Loan, on June 30, 2019; and (iv) the below terms of the Loans were amended to be denominated in
U.S. dollars instead of NIS:
|
|
2016
Loan
|
|
|
2017
Loan
|
|
Aggregate Principal Amount
|
|
$
|
531,067
|
|
|
$
|
822,144
|
*
|
Conversion Price Per Wize US Share
|
|
$
|
0.9768
|
|
|
$
|
1.1112
|
|
Aggregate Maximum Investment Right
|
|
$
|
796,601
|
|
|
$
|
1,233,216
|
**
|
Exercise Price of Investment Right
|
|
$
|
1.308
|
|
|
$
|
1.332
|
|
*
Principal loan amount of $274,048 for each of the three 2017 Lenders.
**
Maximum Investment Right of $411,072 for each of the three 2017 Lenders.
Rimon
Gold and Ridge Consents to the Merger Agreement
. In connection with the Merger Agreement, Wize Israel sought and obtained
the written consents of Rimon Gold and Ridge to the transactions contemplated by the Merger Agreement. The consent provided by
Rimon Gold provided that it is based upon, among other things, the following obligations: (1) following the closing of the Merger
Agreement, we will assist Rimon Gold with its filing requirements, if any, with the SEC with respect to beneficial ownership and
similar reports; and (2) at closing of the Merger Agreement, we will execute and deliver to Rimon Gold the Wize Guaranty, which
we executed and delivered to Rimon Gold.
Under
the Wize Guaranty, we irrevocably guarantee Wize Israel’s obligations to Rimon Gold under the Convertible Loans. In addition,
the Wize Guaranty contains a number of restrictive covenants that limit our operating flexibility. These covenants include, among
other things, limitations on the creation of liens; on the incurrence of indebtedness; on dispositions of assets, mergers, acquisitions
and other change of control transactions; on changes in the general nature of our business; and on the distribution of dividends.
Wize Israel has complied with the aforementioned covenants through the date of this prospectus.
2017
PIPE
. On June 23, 2017, Wize Israel entered into a Private Placement Agreement (the “2017 PIPE Agreements”) with
each of Yosef Eliyahu Peretz (“Peretz”), Yaakov Zarachia (“Zarachia”), Simcha Sadan (“Sadan”)
and Jonathan Brian Rubini (“Rubini”, and together with Peretz, Zarachia and Sadan, the “2017 PIPE Investors”).
Pursuant to the 2017 PIPE Agreements, the 2017 PIPE Investors invested a total of up to NIS 3.49 million (approximately $1 million)
in exchange for a total of 207,739 ordinary shares of Wize Israel, at a price per share of NIS 16.8 (approximately $4.8), with
Peretz investing NIS 490,000 (approximately $139,000) in exchange for the private placement of 29,167 ordinary shares of Wize
Israel (the “Peretz Financing”) and each of Zarachia, Sadan and Rubini (the “Other Investors”) investing
NIS 1 million (approximately $282,000) in exchange for the private placement of 59,524 ordinary shares of Wize Israel each (together,
the “Other Financing”), and together with the Peretz Financing, the “2017 PIPE”). At the Effective Time,
the 207,739 ordinary shares of Wize Israel that were issued to the 2017 PIPE Investors as part of the 2017 PIPE were automatically
cancelled and converted, based on the Exchange Ratio, into an aggregate of 860,987 shares of our Common Stock.
Subject
to the closing of the Merger, Wize Israel also undertook to cause us to grant 2017 Warrants to each of the 2017 PIPE Investors,
with each PIPE Warrant being exercisable into one share of our Common Stock, with a term of three years from the date of grant.
According to the 2017 PIPE Agreements, the number of 2017 Warrants and the exercise price thereof will reflect, prior to giving
effect to an adjustment based on the exchange ratio, (i) 30,625 warrants to Peretz and (ii) 62,500 warrants to each of the Other
Investors, each warrant exercisable into one ordinary share of Wize Israel, at an exercise price of NIS 28.8 per share (approximately
$8.40). Based on the Exchange Ratio, Peretz was granted 126,928 2017 Warrants and each of the Other Investors was granted 259,036
2017 Warrants, each at an exercise price of $1.9728. Consistent with the foregoing, we executed and delivered the 2017 Warrants
to the 2017 PIPE Investors on November 16, 2017.
On
June 22, 2017, Ridge provided notice to Wize Israel that it had waived its right to adjust the 2017 Loan Conversion Price in connection
with the Peretz Investment. On July 4, 2017, Wize Israel completed the Peretz Investment. However, Ridge did not waive its right
to adjust the 2017 Loan Conversion Price in connection with the Other Investments. On July 31, 2017, at a general meeting of the
shareholders of Wize Israel, the Other Investments was approved and on August 7, 2017 Wize Israel completed the Other Investments.
October
2018 Private Placement.
On October 22, 2018, the Company entered into a securities purchase agreement with certain accredited
investors. Pursuant to the purchase agreement, the Company agreed to sell to the investors, and the investors agreed to purchase
from the Company, in a private placement, an aggregate of (i) 3,100,000 shares of common stock, for a purchase price of $1.00
per share, and (ii) 1,350 shares of newly created Series A Preferred Stock (each convertible into 1,000 shares of common stock),
for a purchase price of $1,000 per share, for aggregate gross proceeds under the purchase agreement of $4,450. The Company also
agreed to issue to the investors Series A Warrants to purchase an aggregate of 4,450,000 shares of common stock (equal to 100%
of the shares of common stock sold (on an as-converted basis with respect to shares of Series A Preferred Stock)), and Series
B Warrants to purchase an aggregate of 4,450,000 shares of common stock (equal to 100% of the shares of common stock sold (on
an as-converted basis with respect to shares of Series A Preferred Stock)). The Series A Warrants will have an exercise price
of $1.10 per share, and the Series B Warrants will have an exercise price of $1.00 per share. The investors under the purchase
agreement include prior investors in the Company and a lender to the Company.
Off-Balance
Sheet Arrangements
As
of September 30, 2018, December 31, 2017 and December 31, 2016, 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 2w to our audited consolidated financial statements for
the year ended December 31, 2017 and Note 2b to the accompanying Q3 2018 Financial Statements appearing elsewhere in this prospectus.
Critical
Accounting Policies
Classification
and measurement of the Loans
(including modifications accounting). The proceeds received upon issuance of the 2016 Loan together
with a freestanding derivative financial instrument (derivative liability for the 2016 Investment Right) were allocated to the
financial instruments issued, based on the residual value method. The detachable derivative financial instrument was recognized
based on its fair value and the remaining amount was allocated to the 2016 Loan component.
|
a.
|
Wize
Israel considered the applicability of the “Derivatives and Hedging” guidance and determined that the embedded
conversion feature of the 2016 Loan should not be separated from the host instrument because it qualifies for equity classification.
Furthermore, Wize Israel applied the “Beneficial Conversion Features” (“BCF”) guidance to determine
whether the conversion feature is beneficial to the investor.
|
The
BCF was calculated by allocating the proceeds received in financing transactions to the 2016 Loan and to any detachable freestanding
financial instrument (derivative liability for the 2016 Investment Right) included in the transaction, and by measuring the intrinsic
value of the conversion option based on the effective conversion price as a result of the allocated proceeds.
The
intrinsic value of the conversion option was recorded as a discount on the 2016 Loan with a corresponding amount credited directly
to equity as additional paid-in capital. After the initial recognition, the discount on the 2016 Loan was amortized as interest
expense over the contractual term of the 2016 Loan by using the effective interest method.
|
b.
|
Wize
Israel considered the applicability of the “Derivatives and Hedging” guidance and determined that the embedded
conversion feature of the 2017 Loan should not be separated from the host instrument because the embedded conversion option,
if freestanding, does not meet the definition of a derivative, since its terms do not require or permit net settlement. Furthermore
Wize Israel applied the BCF guidance to determine whether the conversion feature is beneficial to the investor.
|
The
amount of the BCF with respect to the 2017 Loan was calculated at the commitment date, as the difference between the conversion
price (i.e. the entire proceeds received for the 2017 Loan) and the aggregate fair value of the Common Stock and other securities
(which consist of the 2017 Investment Right) into which the 2017 Loan is convertible. As such difference was determined to be
greater than the amount of the entire proceeds received for the 2017 Loan, the amount of the discount assigned to the BCF was
limited to the amount of the entire proceeds.
MANAGEMENT
Directors
and Executive Officers
Set
forth below is certain information with respect to the individuals who are our directors and executive officers.
Name
|
|
Age
|
|
Position
|
|
|
|
|
|
Noam
Danenberg
|
|
48
|
|
Chairman
of the Board
|
|
|
|
|
|
Michael
Belkin
|
|
76
|
|
Director
|
|
|
|
|
|
Yossi
Keret
|
|
53
|
|
Director
|
|
|
|
|
|
Franck
Amouyal
|
|
35
|
|
Director
|
|
|
|
|
|
Joseph
Zarzewsky
|
|
58
|
|
Director
|
|
|
|
|
|
Or
Eisenberg
|
|
37
|
|
Acting
Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary
|
Business
Experience
The
following is a brief account of the education and business experience during at least the past five years of each director and
executive officer, indicating the principal occupation during that period, and the name and principal business of the organization
in which such occupation and employment were carried out.
Noam
Danenberg
. Noam Danenberg has served as a director and as our Chairman since November 7, 2018. He served as our Chief
Operating Officer from the closing of the Merger on November 15, 2017 until November 7, 2018. Mr. Danenberg has served as a
strategic advisor of Wize Israel since April 2015. Mr. Danenberg co-founded Panmed Inc. (“Panmed”) in January
2014, a biomed investment company. Since 2000, Mr. Danenberg has provided private investment consulting services to
numerous private and public companies through his wholly owned company, N. Danenberg Holding (2000) Ltd. From May 2014 to
January 2015, Mr. Danenberg served as a director of Go.D.M. Investments Ltd. (TASE: GODM). From 2000 to 2012, Mr. Danenberg
served as an investment advisor at International Software Consulting Limited and from 2004 to 2008 he served as the Chairman
and CEO of Fitracks Inc. From 2006 to 2012, he also served as the Chairman of the Board of Hawk Medical Technologies Ltd. Mr.
Danenberg holds a B.B.A. in Computer Science from the European University in Antwerp, Belgium and an M.B.A. from the Boston
University Brussels Graduate Center.
Michael
Belkin, M.A., M.D.
Michael Belkin has served on our board since July 1, 2013. Dr. Belkin is, and has been since 1980, a Professor,
and since 2010, a Professor Emeritus, of Ophthalmology at Tel Aviv University in Tel Aviv, Israel, and the Director of the Ophthalmic
Technologies Laboratory at the university’s Eye Research Institute at the Sheba Medical Center since 1997. Since 2006, Dr.
Belkin also serves as a Senior Consultant to the Eye Research Institute at the Singapore National Eye Institute. He was awarded
a master’s degree in natural sciences by Cambridge University, England, and received a doctorate in medicine from the Hebrew
University of Jerusalem. Dr. Belkin previously served as Director of Research, Development and Non-Conventional Warfare Medicine
in the Israel Defense Forces Medical Corps. He was also the first full-time Director of the Tel Aviv University Eye Research Institute,
Chairman of the Tel-Aviv University Department of Ophthalmology and the President of the Israel Society of Eye and Vision Research,
of which he was one of the founders. Dr. Belkin is an author of over 250 scientific publications and 20 patents. He is an internationally
recognized eye researcher and has received various research awards. His laboratory is dedicated to enabling the transfer of technologies
from university-level research to clinical practice by providing expertise and facilities for laboratory, preclinical and clinical
studies. He is an entrepreneur and advisor of several ophthalmic companies in the fields of lasers, optics, ophthalmic devices,
pharmaceutics and biotechnology. One of his ideas, the ExPRESS miniature glaucoma shunt, is currently used worldwide. Dr. Belkin
is an active, long-standing, member of the Association for Research in Vision and Ophthalmology (ARVO), the American Academy of
Ophthalmology, the American Glaucoma Society and many others. He serves as chairman and member of various international and local
scientific and professional committees as well as scientific journals’ editorial boards. Dr. Belkin’s qualifications
to serve on our Board include his expertise in ophthalmic medical research, his medical experience, and his experience as an advisor
to several ophthalmic companies.
Yossi
Keret
. Yossi Keret has served on our board since the closing of the Merger on November 15, 2017. Mr. Keret has served as the
Chief Executive Officer, Managing Director and Director of Weebit-Nano Ltd. (ASX:WBT) from August 2015 to October 2017. From October
1996 to October 2015, Mr. Keret served as the Chief Financial Officer of numerous public and private companies, including Eric
Cohen Books Ltd. & Burlington English Ltd., Daimler Financial Services Israel Ltd., Pluristem Life Systems Inc. (NASDAQ:PST),
M.L.L. Software and Computers Industries Ltd. (TASE:MLL), Internet-Zahav Group, Ltd. (NASDAQ:IGLD) and Top Image Systems Ltd.
(NASDAQ:TISA). Mr. Keret commenced his career at Kost Forer Gabbay & Kasierer, registered public accounting firm, a member
firm of Ernst & Young Global. Mr. Keret holds a B.A. from Haifa University in Economics and Accounting and is a Certified
Public Accountant in Israel. Mr. Keret’s qualifications to serve on our Board include his expertise in financial matters
and his serving as the Chief Financial Officer in numerous private and public companies.
Dr.
Franck Amouyal
. Dr. Franck Amouyal has served on our board since the closing of the Merger on November 15, 2017. Dr. Amouyal
practices as a medical and surgical ophthalmologist in Israel at Neve Tsedek Medical Center since October 2016 and Koupat Holim
Clalit and Meuhedet since November 2016. From February 2016 to June 2016 he practiced as an ophthalmologist at Sourasky Medical
Center, Ichilov. He conducted his residency and fellowship at the Nord Hospital and La Timone Hospital in Marseille, France, at
the Lariboisière Hospital, Paris, France and in the Jules Stein Eye Institute, UCLA, California, USA, as a research assistant.
Dr. Amouyal is the author of over 10 scientific publications and is a member of the French Society of Ophthalmology (SFO) and
the Association for Research in Vision and Ophthalmology (ARVO). He also lectures on ophthalmology to optometrists, nurses and
medical students. Dr. Amouyal holds a First Cycle and a Second Cycle of Medical Studies degree from the Medical University of
Purpan, Toulouse, France. Dr. Amouyal’s qualifications to serve on our Board include his expertise in ophthalmic medical
research and his medical experience.
Joseph
Zarzewsky
. Joseph Zarzewsky has served on our board since the closing of the Merger on November 15, 2017. Mr. Zarzewsky has
served as the Vice President of Business Development at the Mitrelli Group (“Mitrelli”) since June 2010. He has served
as the Chairman of “SMAD”, a joint venture between Mitrelli and the Harbin Government, China, since June 2011. Mr.
Zarzewsky has also served as the Chairman of the Investment Committee of the Harbin Israel Fund since 2012. He has also previously
served as the Vice President of marketing at Clal Insurance Enterprises Holdings Ltd. (TASE: CLIS) and as the Vice President of
Marketing for the Israel Postal Authority. Mr. Zarzewsky has served as a director of Excellence Underwriter House Ltd. since 2007.
In 2008, he was appointed as the Honorary Economic Advisor of the Harbin Government, China. In addition, in June 2012, he was
honored as an Honorary Citizen of Harbin, China. Mr. Zarzewsky holds an MA in Commercial Law from both the University of Tel Aviv
and University of California, Berkeley. Mr. Zarzewsky’s qualifications to serve on our Board include his expertise in financial
matters.
Or
Eisenberg
. Or Eisenberg has served as our Acting Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary
since the closing of the Merger on November 15, 2017. Mr. Eisenberg has served as the Chief Financial Officer and Acting Chief
Executive Officer of Wize Israel since March 2015. From October 2010 to December 2014, he served as the controller of the Katzir
Fund Group. From March 2013 to December 2014, he served as either an external controller or Chief Financial Officer of a number
of public companies whose shares are listed for trading on the TASE. From October 2007 to October 2010, Mr. Eisenberg was an accountant
at Kost Forer Gabbay & Kasierer, a registered public accounting firm, a member firm of Ernst & Young Global. Mr. Eisenberg
holds a B.A. from Haifa University in Economics and Accounting and is a Certified Public Accountant in Israel.
Scientific
Advisory Board
We
maintain a Scientific Advisory Board consisting of internationally recognized scientists who advise us on the scientific and technical
aspects of our business. The Scientific Advisory Board reviews and consults with respect to projects and occasionally assesses
the value of new technologies and developments. In addition, individual members of the Scientific Advisory Board meet with us
periodically to provide advice in their particular areas of expertise. The Scientific Advisory Board consists of the following
members:
Professor
Penny Asbell, MD
. joined our Scientific Advisory Board in July 2018. She is a Key Opinion Leader in the treatment of dry eye
syndrome. As a principal investigator in countless clinical studies sponsored by the National Institute of Health's National Eye
Institute and by industry sponsors, Dr. Asbell has participated in the development of pharmaceuticals that have included pivotal
treatments for ocular conditions including dry eyes. She is a Professor of Ophthalmology at the Icahn School of Medicine at Mount
Sinai in New York and is the Director of the Cornea Service and Cornea Clinical and Research Fellowships at the Mount Sinai Hospital.
She established Mount Sinai's Lowenstein Foundation Sjogren's Center to provide multi-specialty care for patients with dry eyes
and associated systemic problems and founded the Ocular Inflammatory Biomarker Laboratory at Mount Sinai that is actively seeking
validated biomarkers for ocular surface disease. Dr. Asbell has authored and co-authored hundreds of articles, authored 25 book
chapters, and has presented over 200 lectures and courses. In addition, she has been extensively interviewed by the New York Times,
CBS News, Good Morning America, Bloomberg News, CNN, and many other nationally broadcasted events. She is a world-renowned educator
and has lectured throughout the United States, Europe, Japan, India, and South America. Dr. Asbell has served on the board of
directors of the Tear Film and Ocular Surface Society, the Cornea Society, the Eye Bank for Sight Restoration and Program Committee-Cornea
for ARVO. She is currently the Deputy Editor of Eyewiki which is sponsored by the American Academy of Ophthalmology, Editor in
Chief of ECL, the official journal of CLAO, and Section Editor of Cornea for BMC.
Dr.
Joseph Tauber, MD.
Dr. Tauber joined our Scientific Advisory Board in March 2018. He has been a principal investigator in
over 125 research studies of high-risk corneal transplantation, inflammation and allergic eye diseases, corneal infectious diseases
and numerous studies related to DES. Dr. Tauber has written five book chapters and over 60 articles in ophthalmology medical journals.
He has been awarded the Heed Ophthalmic Foundation Fellowship Award and the National Eye Institute Individual NRSA Award. Dr.
Tauber received his doctorate from Harvard Medical School, his training in internal medicine at Beth Israel Hospital and in ophthalmology
at Tufts-New England Medical Center. He has served as Clinical Professor of Ophthalmology at Kansas University School of Medicine
and University of Missouri-Kansas City School of Medicine. Dr. Tauber specializes in anterior segment surgery, corneal transplantation,
the treatment of corneal and external diseases and laser vision correction procedures. A board-certified ophthalmologist, Dr.
Tauber is the Founder of Tauber Eye Center in Kansas City, Missouri.
Professor
Janos Nemeth, MD
.
Dr. Nemeth joined the Wize Israel Scientific Advisory Board in October 2015 and has been a member
of our Scientific Advisory Board since the closing of the Merger on November 16, 2017. He has performed clinical trials with LO2A
in the treatment of CCH and Sjögren’s demonstrating efficacy in these indications. He has been a principal investigator
or co-investigator in 25 ophthalmology clinical trials, most of them in Phase III. Dr. Nemeth has written and/or edited 10 books,
authored 37 book chapters, and authored 351 scientific articles. He has received numerous awards including the Chibret Award,
the Dr. Ferenc Papolczy Foundation First Prize, both in Hungary, as well as the Imre-Blaskovics Prize and the Schulek Vilmos Prize
of the Hungarian Ophthalmological Society and the Gábor Brooser Prize of the Hungarian Ophthalmological and Diabetes Societies.
Dr. Nemeth is an ophthalmologic surgeon and Board Member of the Drug Discovery and Safety Center at Semmelweis University, Budapest,
Hungary. Dr. Nemeth received his doctorate of medicine from the University of Szeged, Hungary. He was a professor of ophthalmology
at the University of Szeged, Semmelweis University and at Pazmany Peter Catholic University in Hungary. Dr. Nemeth’s research
fields of interest include numerous ophthalmic indications, including Sjögren’s and tear film dynamics.
Family
Relationships
Dr.
Franck Amouyal is the son-in-law of Philippe Halfon, who is a business partner of Noam Danenberg (in businesses unrelated to Wize).
Otherwise, there are no family relationships among our executive officers and directors.
There
have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material
to the evaluation of the ability and integrity of any of our directors, executive officers, or control persons during the past
ten years.
Election
of Directors
Directors
are elected to hold office until such director’s successor is elected and qualified or until such director’s earlier
resignation or removal. Annual meetings of the stockholders, for the election of directors to succeed those whose terms expire,
are to be held at such time each year as designated by our Board, which date shall be within 13 months of the last annual meeting
of stockholders. Officers are elected by our Board, which is required to consider that subject at its first meeting after every
annual meeting of stockholders. Each officer holds his office until his successor is elected and qualified or until his earlier
resignation or removal.
Legal
Proceedings
We
are not aware of any legal proceedings in which any of our directors, officers or affiliates, any owner of record or beneficially
of more than five percent of any class of our voting securities, or any associate of any such director, officer, or affiliate
of our company, or security holder is a party adverse to us or our subsidiaries or has a material interest adverse to us or our
subsidiaries.
Code
of Ethics
We
have not adopted a code of ethics that applies to our officers, directors and employees.
Director
Independence
Our
securities are not listed on a national securities exchange or in an inter-dealer quotation system which has requirements that
directors be independent. However, we have adopted the independence standards of the NASDAQ Capital Market to determine the independence
of our directors and those directors serving on any committee. These standards provide that a person will be considered an independent
director if he or she is not an officer of the company and is, in the view of the company’s board of directors, free of
any relationship that would interfere with the exercise of independent judgment. Our Board has determined that each of Dr. Michael
Belkin, Yossi Keret, Dr. Franck Amouyal and Joseph Zarzewsky are independent as defined under the rules promulgated by the NASDAQ
Capital Market. Other than Mr. Amouyal and Mr. Zarzewsky, none of the independent directors has any relationship with us besides
serving on our Board. Dr. Franck Amouyal is the son-in-law of Philippe Halfon, who is a business partner of Noam Danenberg.
On
June 19, 2017, Wize Israel entered into a finder’s fee agreement with Harbin Israel (Trading) Ltd., an affiliate of Mr.
Zarzewsky, pursuant to which Mr. Zarzewsky will receive a 5% royalty on all of Wize Israel’s revenues to the extent such
revenues are earned from relationships initiated by Mr. Zarzewsky and agreed to by Wize Israel. The term of the agreement is for
12 months unless earlier terminated. Either party may terminate upon twenty-one days’ notice. Mr. Zarzewsky introduced us
to the Chinese Distributor. See “BUSINESS — Marketing, Sales and Distribution,” beginning on page 31
of this prospectus. Our Board considered these relationships and determined that they would not interfere with Mr. Amouyal’s
or Mr. Zarzewsky’s exercise of independent judgment in carrying out the responsibilities of a director.
We
have determined that each of the directors is qualified to serve as a director of the Company based on a review of the experience,
qualifications, attributes and skills of each director. In reaching this determination, we have considered a variety of criteria,
including, among other things: character and integrity; ability to review critically, evaluate, question and discuss information
provided, to exercise effective business judgment and to interact effectively with the other directors; and willingness and ability
to commit the time necessary to perform the duties of a director.
Board
Meeting Attendance
During
the year ended December 31, 2017, our Board held one meeting. All of our directors attended such meeting.
Committees
Audit
Committee and Audit Committee Financial Expert
The
members of our Audit Committee are Yossi Keret, Joseph Zarzewsky and Dr. Franck Amouyal. Our Board has determined that Yossi Keret
is an “audit committee financial expert” as set forth in Item 407(d)(5) of Regulation S-K and that all members of
the Audit Committee are “independent” as defined by the rules of the SEC and the NASDAQ Capital Market rules and regulations.
On March 28, 2018, our Board adopted a written audit committee charter.
Compensation
Committee
The
members of our Compensation Committee are Yossi Keret, Dr. Michael Belkin and Joseph Zarzewsky. Our Board has determined that
all of the members of the Compensation Committee are “independent” as defined by the rules of the SEC and the NASDAQ
Capital Market rules and regulations. On March 28, 2018, our Board adopted a written compensation committee charter.
We
plan to organize a nominating and corporate governance committee during the first half of 2018. Because of our small size, our
Board carries out the duties of the nominating and corporate governance committee. In selecting nominees for directorships, our
Board considers a broad range of characteristics related to qualifications, background and diversity of nominees based on our
current business needs. Our Board has not adopted written guidelines regarding nominees for director. There have been no material
changes to the procedures by which security holders may recommend nominees to our Board.
Board
Leadership Structure and Role in Risk Oversight
In
accordance with our Bylaws, our Board appoints our officers, including our Chief Executive Officer, Chief Financial Officer, and
such other officers as our Board may appoint from time to time. Mr. Noam Danenberg currently serves as our Chairman of the Board
and Mr. Or Eisenberg currently serves as our Acting Chief Executive Officer, Chief Financial Officer, Treasurer and Secretary.
Our Board periodically considers whether changes to our overall leadership structure are appropriate.
Our
Chairman is responsible for chairing meetings of our Board. Our Bylaws provide that if our Chairman is unable to preside at meetings
of our Board, our Chief Executive Officer, if such officer is a director, shall preside at such meetings. Our Chairman is also
responsible for chairing meetings of stockholders. In his absence, our Board may appoint another party to chair the stockholders’
meeting.
Risk
is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of
risks, including strategic risks, enterprise risks, financial risks, regulatory risks, and others. Management is responsible for
the day-to-day management of risks the company faces, while our Board, as a whole, has responsibility for the oversight of risk
management. In its risk oversight role, our Board has the responsibility to satisfy itself that the risk management processes
designed and implemented by management are adequate and functioning as designed.
Our
Board believes that full and open communication between management and our Board is essential for effective risk management and
oversight. Senior management attends Board of Directors meetings and is available to address any questions or concerns raised
by our Board on risk management-related and any other matters.
Communications
by Stockholders with Directors
We
encourage stockholder communications to our Board and/or individual directors. Stockholders who wish to communicate with our Board
or an individual director should send their communications to the care of Secretary, Wize Pharma, Inc., 24 Hanagar Street, Hod
Hasharon, Israel 4527708. The Secretary will maintain a log of such communications and will transmit as soon as practicable such
communications to the Chairman of the Board or to the identified individual director(s), although communications that are abusive,
in bad taste or that present safety or security concerns may be handled differently, as determined by the Secretary.
EXECUTIVE
COMPENSATION
The
following table sets forth information concerning the annual compensation awarded to, earned by, or paid to the following named
executive officers for all services rendered in all capacities to us for the years ended December 31, 2017 and 2016. The amounts
set forth for Mr. Eisenberg and Mr. Danenberg were originally denominated in NIS and were translated into U.S. Dollars at the
average current exchange rate for each year.
Name
And Position
|
|
Year
|
|
Salary
($) (1)
|
|
|
Bonus
($)
|
|
|
Stock
Awards
($)
|
|
|
Option
Awards
($) (2)
|
|
|
All
Other Compensation ($)
|
|
|
Total
($)
|
|
Or
Eisenberg, Acting Chief Executive Officer and Chief
|
|
2017
|
|
|
163,000
|
|
|
|
|
|
|
|
|
|
|
|
2,000
|
|
|
|
10,000
|
(3)
|
|
|
175,000
|
|
Financial
Officer
(4)
|
|
2016
|
|
|
152,000
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
3,000
|
(3)
|
|
|
164,000
|
|
Noam
Danenberg, Chairman and Former Chief Operating Officer and Strategic
|
|
2017
|
|
|
87,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
(3)
|
|
|
107,000
|
|
Advisor
(5)
|
|
2016
|
|
|
78,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,000
|
(3)
|
|
|
84,000
|
|
Pnina
Fishman, Ph.D.
Former
Chairman and Chief Executive
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Officer
(6)
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Itay
Weinstein Former Chief Financial
|
|
2017
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,000
|
|
Officer
(7)
|
|
2016
|
|
|
18,000
|
|
|
|
|
|
|
|
|
|
|
|
258
|
|
|
|
|
|
|
|
18,258
|
|
(1)
|
Amounts
shown represent consulting fees earned or paid during the fiscal year.
|
|
|
(2)
|
Reflects
the aggregate grant date fair value of option awards granted during the relevant fiscal year calculated in accordance with
FASB ASC Topic 718.
|
|
|
(3)
|
Amount
represents car allowance.
|
|
|
(4)
|
Mr.
Eisenberg was appointed as our Acting Chief Executive Officer and Chief Financial Officer on November 16, 2017 in connection
with the Merger. He has served as the Acting Chief Executive Officer and Chief Financial Officer of Wize Israel since 2015.
|
|
|
(5)
|
The
services of Mr. Danenberg are provided via N. Danenberg Holdings (2000) Ltd. (“Danenberg Holdings”), a services
company wholly owned by Mr. Danenberg, pursuant to the terms of the services agreement by and between Wize Israel and Danenberg
Holdings. Pursuant to such agreement, Mr. Danenberg shall dedicate 80% of his time to us. Mr. Danenberg was appointed as our
Chairman on November 7, 2018. Prior to such time he served as our Chief Operating Officer since his appointment on November
16, 2017 in connection with the Merger. He has served as a strategic advisor to Wize Israel since 2015.
|
|
|
(6)
|
Dr.
Fishman served as our Chief Executive Officer until her resignation on November 16, 2017 in connection with the Merger. As
Chief Executive Officer of Can-Fite, our former majority stockholder and parent, Dr. Fishman was compensated by Can-Fite,
for her services to us as Chairman of the Board and Chief Executive Officer.
|
|
|
(7)
|
Mr.
Weinstein served as our Chief Financial Officer until his resignation on November 16, 2017 in connection with the Merger.
Mr. Weinstein is also the controller of Can-Fite, our former majority stockholder and parent, and was compensated by Can-Fite
for services provided to Can-Fite.
|
Executive
Employment Agreements
Except
as set forth below, we have not entered into any employment agreements with the named executive officers listed in the table above.
Employment
Agreement with Or Eisenberg
Mr.
Eisenberg has served as Wize Israel’s Chief Financial Officer and Acting Chief Executive Officer since March 2015 and as
our Financial Officer and Acting Chief Executive Officer since the Merger. Mr. Eisenberg’s employment agreement is with
Wize Israel. On August 21, 2018, Wize Israel entered into a restated employment agreement with Mr. Eisenberg, which provides for
an initial term of three years, subject to automatic one year renewals thereafter unless the agreement is terminated in accordance
with its terms. Mr. Eisenberg is entitled to receive an annual base salary of 480,000 NIS ($131,052), subject to adjustment by
the Board of Directors of Wize Israel. The salary shall be increased by 10% upon each of the listing of the Company’s securities
on a national exchange and the completion of the Phase IV study randomized, double-masked study of LO2A versus Alcon’s Systane
®
Ultra UD. The salary shall also be increased by NIS 10,000 upon
each
final closing of a financing of the Company
or Wize Israel during the course of Mr. Eisenberg’s employment in which the Company receives net proceeds of $4,000,000.
As compensation for his role as Chief Executive Officer, he will receive a monthly bonus of 5,000 NIS ($1,366). He is also eligible
to receive a transaction bonus in connection with certain material transactions, subject to the Company’s clawback rights,
as outlined in the employment agreement. In addition, he is eligible to participate in all health insurance and benefit plans
offered by the Company to its executives and is entitled to the reimbursement of business expenses and a vehicle allowance.
In
the event Mr. Eisenberg’s employment is terminated by Wize Israel other than for Cause or if he resigns for Good Reason
(as such terms are defined in his employment agreement), he will be entitled to receive severance benefits under Israeli law as
well as his salary for the remainder of the term of the agreement. In the event Mr. Eisenberg is terminated for Cause, he will
be not entitled to receive any payments other than such amounts owing and outstanding prior to the termination of his employment.
Mr. Eisenberg is subject to non-competition and non-solicitation restrictions throughout his employment and for a period of six
months following the termination of his employment.
Services
Agreement with Noam Danenberg
On
August 20, 2018, Wize Israel entered into a restated consulting services agreement with N. Danenberg Holdings (2000) Ltd. (the
“Consulting Company”) and Noam Danenberg, the Chief Operating Officer of the Company at the time and the Company’s
current Chairman. The Consulting Services Agreement provides that Mr. Danenberg will provide consulting services including, but
not limited to, general strategic consulting services around business development and fund raising for an initial term of three
years. As payment for the consulting services, the Company will pay the Consulting Company 40,000 NIS ($10,921) per month subject
to adjustment by the Board of Wize Israel. In addition, the Consulting Company will be eligible to receive a transaction bonus
in connection with certain material transactions, subject to the Company’s clawback right, as outlined in the consulting
services agreement.
The consulting fees shall be increased by 10% upon each of the listing of the Company’s securities
on a national exchange and the completion of the Phase IV study randomized, double-masked study of LO2A versus Alcon’s Systane
®
Ultra UD. The consulting fees shall also be increased by NIS 10,000 upon
each
final closing of a financing of the
Company or Wize Israel during the course of the services agreement in which the Company receives net proceeds of $4,000,000.
In
the event that the Consulting Company terminates the engagement for Good Reason as defined in the consulting services agreement,
it is entitled to receive the balance of the remaining service fees for the term of the agreement. In the event that Wize Israel
terminates the agreement for Cause as defined in the consulting services agreement, the Consulting Company will not be entitled
to receive any payments other than amounts owing and outstanding prior to the termination of the agreement. Following the initial
three year term, the agreement may be terminated by either party upon 120 days prior written notice. The Consulting Company and
Mr. Danenberg are subject to non-competition and non-solicitation restrictions throughout the engagement and for a period of six-months
following the termination of the consulting services.
On
November 7, 2018, the consulting agreement was amended in connection with Mr. Danenberg’s resignation as Chief Operating
Officer and appointment to the Board and as Chairman of the Board. The material terms of the agreement were not revised.
Each
of the above agreements incorporates the terms and provisions of a customary employee proprietary information, invention, non-competition
and non-solicitation between Wize Israel and the executive.
Outstanding
Equity Awards at Fiscal Year-End
The
following table provides information regarding all outstanding equity awards for our named executive officers as of December 31,
2017:
|
|
Option
Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
|
|
|
Options
|
|
|
Options
|
|
|
Exercise
|
|
|
Option
|
|
|
(#)
|
|
|
(#)
|
|
|
Price
|
|
|
Expiration
|
Name
|
|
Exercisable
|
|
|
Unexercisable
|
|
|
($)
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael Belkin (1)
|
|
|
2,176
|
|
|
|
-
|
|
|
|
159.12
|
|
|
1/7/23
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Itay Weinstein (2)
|
|
|
544
|
|
|
|
-
|
|
|
|
216
|
|
|
5/29/23
|
(1)
|
These
options were granted on July 1, 2013 and vested as follows: 1/12
th
vested on September 30, 2013 and 1/12th of the
total options vested on the last day of each of the eleven quarters thereafter.
|
|
|
(2)
|
These
options were granted on May 9, 2013 with 50% vested upon grant and the remaining 50% vesting on a quarterly basis over a three
year period.
|
Compensation
of Directors
The
following table provides information regarding the total compensation that we paid or awarded to our non-executive directors during
the year ended December 31, 2017.
Name
|
|
Fees Earned
or Paid
in Cash
|
|
|
Stock
Awards
|
|
|
Option
Awards
|
|
|
Nonqualified
Deferred
Compensation
Earnings
|
|
|
All Other
Compensation
|
|
|
Total
|
|
|
|
($)
|
|
|
($)
|
|
|
($)(1)
|
|
|
($)
|
|
|
($)
|
|
|
($)
|
|
Ilan Cohn, Ph.D.(2)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Guy Regev
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Roger Kornberg, Ph.D.(3)
|
|
|
3,025
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3,025
|
|
Dr. Michael Belkin (3), (4)
|
|
|
4,474
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,474
|
|
Ron Mayron (5)(6)
|
|
|
10,340
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,340
|
|
Yossi Keret (6)
|
|
|
750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
750
|
|
Dr. Franck Amouyal (6)
|
|
|
750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
750
|
|
Joseph Zarzewsky (6)
|
|
|
750
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
750
|
|
(1)
|
Reflects
the aggregate grant date fair value of option awards granted during the relevant fiscal year calculated in accordance with
FASB ASC Topic 718.
|
(2)
|
Reinhold
Cohn and Partners, an Israeli partnership, of which Ilan Cohn, Ph.D. is a partner provides intellectual property legal services
to us in the ordinary course of business.
|
(3)
|
In
connection with the appointments of Drs. Kornberg and Belkin, we entered into agreements to pay director fees for attendance
at board meetings or any committee of the board. Drs. Kornberg and Belkin will each receive $2,000 for attendance in person
at a meeting of the Board, $750 for attendance by telephone at a meeting of the Board, and $750 for attendance at each meeting
of any committee of the Board. Dr. Kornberg resigned from the Board on November 16, 2017 and the agreement with Dr. Belkin
was terminated on February 22, 2018.
|
(4)
|
On
July 1, 2013, we granted to Dr. Belkin options to purchase 2,176 shares of our Common Stock at $159.12 per share. The options
are fully vested and will be expire on the ten year anniversary of the grant date.
|
|
|
(5)
|
Mr.
Mayron received NIS 32,866 (approximately $9,100) in cash from Wize Israel for serving as the Chairman of the Board of Wize
Israel. Mr. Mayron served on the Board of Directors of Wize Israel from February 24, 2015 until his resignation on November
7, 2018.
|
|
|
(6)
|
Each
Yossi Keret, Dr. Franck Amouyal and Joseph Zarzewsky has served on our Board since November
16, 2017 and received $750 from us in 2017. Mr. Mayron served on our Board from November 16, 2017 to November 7, 2018.
|
Services
Agreement with Ron Mayron
Mr.
Mayron resigned from all positions with the Company and Wize Israel on November 7, 2018. In 2015 Wize Israel had entered into
a services agreement with Ron Med Ltd. (“RML”), a services company wholly owned by Mr. Mayron, with respect to the
engagement of the services of Mr. Mayron which included active chairman of the board of directors services to Wize Israel and
to all subsidiaries and/or related companies of Wize Israel to the extent required from time to time by Wize Israel and in accordance
with its needs. Mr. Mayron was required to devote at least 20% of his time to providing services to Wize Israel.
Mr.
Mayron was initially entitled to a fixed monthly payment of NIS 20,000 (approximately $5,500) (the “Mayron Monthly Payment”)
for his services to Wize Israel. In November 2016, the shareholders of Wize Israel approved the revised compensation terms of
Mr. Mayron, which included that effective as of January 1, 2016, Mr. Mayron would no longer receive the Mayron Monthly Payment,
but would rather receive a payment in accordance with the Compensation Regulations promulgated under the Israeli Companies Law,
consisting of an annual fee of approximately NIS 20,000 (approximately $5,500) and a per meeting fee of approximately NIS 1,100
(approximately $300), which payment was no longer payable to him as of the Closing Date. In addition, Mr. Mayron was granted an
option to purchase 300,000 ordinary shares of Wize Israel.
In
addition, Mr. Mayron was entitled to a bonus of up to 0.25% of the consideration paid in connection with a material transaction
of Wize Israel or a Wize Israel subsidiary, including the sale of a subsidiary, sale of operations, asset sale related to the
field of operation, sale of shares, a merger of Wize Israel, Wize Israel entering into a material license agreement, raising capital
and/or the financing of Wize Israel (the “Annual Mayron Grant”). The Annual Mayron Grant was not payable in connection
with the Merger. In addition, Mr. Mayron is entitled to an option to purchase 105,000 ordinary shares of Wize Israel (the “Capital
Remuneration”), which was granted to Mr. Mayron in September 2015. In connection with the Merger and for no consideration,
on June 19, 2017, Mr. Mayron agreed, subject to and effective upon the closing of the Merger, to cancel any and all options or
other rights to purchase Wize Israel’s shares that are not exercised at least seven business days prior to the closing of
the Merger. On October 25, 2017 and on November 8, 2017, Mr. Mayron exercised options to purchase a total of 182,056 ordinary
shares of Wize Israel, some of which he sold prior to the Closing Date. The remaining shares of Wize Israel that Mr. Mayron held
as of the Closing Date were converted into shares of our Common Stock upon the closing of the Merger. The maximum Annual Mayron
Grant together with the Capital Remuneration may not exceed in any fiscal year NIS 8 million (approximately $2.2 million), to
all of the officers of Wize Israel, in the aggregate.
Consulting
Agreement with Ron Mayron
On
November 7, 2018, the Company and Wize Israel entered into a new consulting agreement with RML, pursuant to which Ron Med shall
serve as a strategic advisor to the Company's senior management and Board. RML shall receive monthly compensation of NIS 20,000
(approximately $5,415). The consulting agreement has an initial term term of one year and will be automatically renewed for additional
one year periods. The consulting agreement may be terminated by either party following the initial term.
Finder’s
Fee Agreement with Joseph Zarzewsky
On
June 19, 2017, Wize Israel entered into a finder’s fee agreement with Harbin Israel (Trading) Ltd., an affiliate of Mr.
Zarzewsky, pursuant to which Mr. Zarzewsky will receive a 5% royalty on all of Wize Israel’s revenues to the extent such
revenues are earned from relationships initiated by Mr. Zarzewsky and agreed to by Wize Israel. The term of the agreement is for
12 months unless earlier terminated. Either party may terminate upon twenty-one days’ notice. Mr. Zarzewsky introduced us
to the Chinese Distributor. See “BUSINESS — Marketing, Sales and Distribution,” beginning on page 31
of this prospectus.
Compensation
of Directors
On
February 22, 2018, our compensation committee determined to pay each director an annual fee of $10,000 in cash in addition to
receiving $800 in cash per in person meeting, $400 per signed unanimous consent and $600 per telephonic meeting, with respect
to meetings and/or signed resolutions, as applicable, of the Board or a committee of the Board.
We
have also purchased Directors and Officers insurance to cover the potential liability of our directors and executive officers.
Prior to the Effective Time of the Merger, Wize Israel purchased, for a period of seven years following the Effective Time, a
directors’ and officers’ liability “tail” insurance policy or policies covering the then current and former
directors or officers of Wize Israel for events occurring at or prior to the Effective Time, which insurance will be of at least
the same coverage and amounts and contain terms and conditions which are no less advantageous to such persons than the coverage,
amounts, terms and conditions of the directors’ and officers’ liability insurance policy maintained by Wize Israel
as of the date of the Merger Agreement.
Stock
Option Plans
2012
Stock Incentive Plan
On
February 6, 2012, our Board and stockholders adopted the 2012 Stock Incentive Plan (the “2012 Plan”). The purpose
of the 2102 Plan is to advance the interests of our stockholders by enhancing the Company’s ability to attract, retain and
motivate persons who are expected to make important contributions to us and by providing such persons with equity ownership opportunities
and performance-based incentives that are intended to better align the interests of such persons with those of our stockholders.
Each
stock option granted shall be exercisable at such times and terms and conditions as the Board may specify in the applicable option
agreement, provided that no option will be granted with a term in excess of 10 years. Upon the adoption of the 2012 Plan, we reserved
for issuance 45,370 shares of Common Stock. There are 45,370 shares of Common Stock authorized for non-statutory and incentive
stock options, restricted stock units, and stock grants under the 2012 Plan, which are subject to adjustment in the event of stock
splits, stock dividends, and other situations. As of December 31, 2017, we had 40,474 shares of Common Stock available for future
grant under the 2012 Plan. During the years ended December 31, 2017 and 2016, we did not grant any new stock options.
The
2012 Plan is administered by our Board. The persons eligible to participate in the 2012 Plan are as follows: all of our employees,
officers and directors, as well as consultants and advisors to the Company (as such terms consultants and advisors are defined
and interpreted for purposes of Form S-8 under the Securities Act of 1933, as amended, or any successor form) are eligible to
be granted Awards under the 2012 Plan. Each person who is granted an Award under the 2012 Plan is deemed a “Participant.”
“Award” means Options (as defined in Section 5(a)), “Restricted Stock” (as defined in Section 6(a)), “Restricted
Stock Units” (as defined in Section 6(a)), “Other Stock-Based Awards” (as defined in Section 7(a)) and “Performance
Awards” (as defined in Section 8(a)). follows: (a) our employees and any of our subsidiaries; (b) non-employee members of
the board or non-employee members of our Board or any of our subsidiaries; and (c) consultants and other independent advisors
who provide services to us or any of our subsidiaries.
The
2012 Plan will continue in effect until all of the stock available for grant or issuance has been acquired through exercise of
options or grants of shares, or until February 6, 2022, whichever is earlier. The 2012 Plan may also be terminated in the event
of certain corporate transactions such as a merger or consolidation or the sale, transfer or other disposition of all or substantially
all of our assets.
On
January 29, 2013, our Board conditionally approved the adoption of an annex (the “Annex”) to the 2012 Plan. Approval
of the Annex by our Board was contingent upon the following: 1) 30 days elapsing since approval of the Annex by the Board, and
2) filing with Israeli income tax authorities (the “Tax Authorities”). On February 7, 2013, the Annex was filed with
the Tax Authorities and on March 8, 2013, the Annex became effective.
The
Annex applies only to grantees who are residents of the State of Israel at the date of grant or those who are deemed to be residents
of the State of Israel for the payment of tax at the date of grant. U.S. tax rules and regulations will not apply to any grants
to a grantee who is a resident of the State of Israel at the date of grant or those who are deemed to be residents of the State
of Israel for the payment of tax at the date of grant.
The
purpose of the approval and adoption of the Annex is to harmonize the terms and conditions of the 2012 Plan with applicable Israeli
law and provide specific provisions regarding optionees who are subject to Section 102(a) of the Israeli Income Tax Ordinance
(New Version), 5721-1961 (the “Ordinance”). The Annex is intended to promote our interests by providing present and
future officers, other employees (including directors who are also our employees) and consultants with an incentive to enter into
and continue in our employ and to acquire a proprietary interest in our long-term success. Our Board shall have the authority
to determine additional persons which will be granted rights under the Annex.
Pursuant
to the Annex, our Board is authorized to grant stock options to persons subject to the Ordinance. Our Board may grant to employees,
officers, and directors options under Section 102 of the Ordinance, or 102 Options, and to consultants and other service providers
options under Section 3(i) of the Ordinance, or 3(i) Options. Our Board may designate 102 Options as “Approved 102 Options,”
for which the options and shares upon exercise must be held in trust and granted through a trustee, and as “Unapproved 102
Options,” for which the options and shares upon exercise do not have to be held in trust. As described further below, the
type of option and duration of time the option and shares upon exercise are held in trust will determine the tax consequences
to the participant. Of the Approved 102 Options, our Board may grant options as “Work Income Options,” for which the
options and shares upon exercise must be held in trust for 12 months from the date of grant, or as “Capital Gain Options,”
for which the options and shares upon exercise must be held in trust for 24 months from the date of grant. If the requirements
of the Approved 102 Options are not met, the options are regarded as Unapproved 102 Options. 3(i) Options and the shares upon
exercise may be held in trust as well, depending upon the agreement between our Board, optionee, and the trustee of the trust.
Approved 102 Options which have been granted as “Capital Gains Options” enable the optionee to pay capital gains tax
on such option provided the terms of the grant and Section 102 of the Ordinance have been met whilst all other option grants under
the Annex are treated as regular income and are subject to the taxation applicable thereto. The trustee appointed under the Annex
is required to qualify as a trustee under Section 102 of the Ordinance and shall hold any options granted under the Annex in trust
for the respective holding periods as designated under the Annex and Section 102 of the Ordinance. The grant of options under
the Annex requires the delivery of a grant notification letter to each optionee in which all the relevant terms and conditions
of such grant are set out. The grant notification letter may include additional matters relating to the vesting of the options,
exercise periods, events of termination of employment, etc. The Annex sets out that for as long as options or shares purchased
pursuant to thereto are held by the trustee on behalf of the optionee, all rights of the optionee over the shares are personal,
cannot be transferred, assigned, pledged or mortgaged, other than by will or laws of descent and distribution. The Annex shall
be governed by and construed and enforced in accordance with the laws of the State of Delaware.
The
following table summarizes information as of the close of business on December 31, 2017 concerning the 2012 Plan and other options
outstanding.
Plan category
|
|
Number of
securities
to be
issued upon
exercise of
outstanding
options
(a)
|
|
|
Weighted-average exercise price of outstanding options
(b)
|
|
|
Securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
|
|
Equity compensation plans approved by security holders
|
|
|
4,896
|
|
|
|
191.04
|
|
|
|
40,474
|
|
Equity compensation plans not approved by security holders
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
|
4,896
|
|
|
|
191.04
|
|
|
|
40,474
|
|
2018
Stock Incentive Plan
On
February 22, 2018, the Board approved the adoption of the 2018 Stock Incentive Plan (the “2018 Plan”), including an
Israeli annex to comply with Israeli law, in particular the provisions of section 102 of the Israeli Income Tax Ordinance. Under
the 2018 Plan, we may grant our employees, directors, consultants and/or contractors stock options, shares of Common Stock, restricted
stock and restricted stock units of our company. The Board is currently serving as the administrator of the 2018 Plan, although
the 2018 Plan allows for the administrator to be a committee of the Board appointed by the Board for the purpose of the administration
of the 2018 Plan. Each stock option granted is exercisable, unless otherwise determined by the administrator, in twelve equal
installments over the three year period from the date of grant. Unless otherwise determined by the administrator, the term of
each award will be seven years. The exercise price per share subject to each option will be determined by the administrator, subject
to applicable laws and to guidelines adopted by the Board from time to time. In the event the exercise price is not determined
by the administrator, the exercise price of an option will be equal to the closing stock price of the Common Stock on the last
trading day prior to the date of grant. Upon the adoption of the 2018 Plan, the Board reserved for issuance 435,052 shares of
Common Stock. On August 15, 2018, the Company amended the 2018 Plan to increase the number of shares issuable under the Plan to
2,500,000 shares, and on the first day of each fiscal year beginning with the 2019 fiscal year, by an amount equal to the lower
of (i) 1,000,000 shares or (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year.
On
April 4, 2018, we granted stock options and RSUs to our directors and officers, exercisable, in the aggregate, into 218,500 and
120,200 shares of our Common Stock, respectively, pursuant to the 2018 Plan. The options are exercisable in twelve equal installments
over the three year period from the date of grant and the term of the options is seven years from the date of grant. The exercise
price per share subject to each option is $3.59, which was the closing stock price of the Common Stock on the last trading day
prior to grant date. The RSUs are for past services rendered and were fully vested upon grant. The purchase price of each RSU
is $.001, the par value of the Common Stock.
In
connection with the Merger and for no consideration, each of the holders of outstanding equity awards of Wize Israel, subject
to and effective upon the closing of the Merger, agreed to cancel any and all options or other rights to purchase Wize Israel’s
shares that were not exercised at least seven business days prior to the closing of the Merger, such that no equity awards of
Wize Israel were outstanding upon the closing of the Merger.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following table sets forth information as of November 20, 2018 regarding the beneficial ownership of our Common Stock by (i) those
persons who are known to us to be the beneficial owner(s) of more than 5% of our Common Stock, (ii) each of our directors and
named executive officers, and (iii) all of our directors and executive officers as a group. Except as otherwise indicated, the
beneficial owners listed in the table below possess the sole voting and dispositive power in regard to such shares and have an
address of c/o Wize Pharma, Inc., 24 Hanagar Street, Hod Hasharon, Israel 4527708. As of November 20, 2018, there were 8,462,550
shares of our Common Stock outstanding.
Beneficial
ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect
to securities. Shares of our Common Stock subject to options, warrants, notes or other conversion privileges currently exercisable
or convertible, or exercisable within 60 days of the date of this table, are deemed outstanding for computing the percentage of
the person holding such option, warrant, note, or other convertible instrument but are not deemed outstanding for computing the
percentage of any other person. Where more than one person has a beneficial ownership interest in the same shares, the sharing
of beneficial ownership of these shares is designated in the footnotes to this table.
Name and Address of Beneficial Owner
|
|
Amount and
Nature of
Beneficial
Ownership
|
|
|
Percent of Class
|
|
5% and Greater Shareholders
|
|
|
|
|
|
|
Rimon Gold Assets Ltd.
(1)
|
|
|
2,988,117
|
|
|
|
27.58
|
%
|
Ridge Valley Corporation
(2)
|
|
|
1,399,851
|
|
|
|
15.87
|
%
|
Yaakov Zarachia
(3)
|
|
|
774,533
|
|
|
|
8.88
|
%
|
Simcha Sadan
(4)
|
|
|
682,843
|
|
|
|
7.96
|
%
|
Shimshon Fisher
(5)
|
|
|
573,157
|
|
|
|
6.50
|
%
|
Bigger Capital Fund, LP
(6)
|
|
|
750,000
|
|
|
|
8.37
|
%
|
District 2 Capital Fund L.P.
(7)
|
|
|
750,000
|
|
|
|
8.37
|
%
|
Jonathan Rubini
(8)
|
|
|
1,555,739
|
|
|
|
14.62
|
%
|
Named Executive Officers and Directors
|
|
|
|
|
|
|
|
|
Ron Mayron
(9)
|
|
|
77,884
|
|
|
|
*
|
|
Dr. Franck Amouyal
(10)
|
|
|
6,249
|
|
|
|
*
|
|
Dr. Michael Belkin
(11)
|
|
|
8,425
|
|
|
|
*
|
|
Yossi Keret
(12)
|
|
|
6,249
|
|
|
|
*
|
|
Joseph Zarzewsky
(13)
|
|
|
6,249
|
|
|
|
*
|
|
Or Eisenberg
(14)
|
|
|
49,100
|
|
|
|
*
|
|
Noam Danenberg
(15)
|
|
|
107,515
|
|
|
|
1.27
|
%
|
Executive Officers and Directors as a Group (7 Persons)
(16)
|
|
|
261,671
|
|
|
|
3.09
|
%
|
*
|
Represents
ownership of less than 1%
|
(1)
|
Represents
(i) 617,442 shares of Common Stock, (ii) 605,298 shares of Common Stock issuable upon the conversion of the 2016 Convertible
Loan, (iii) 264,709 shares of Common Stock issuable upon the conversion of the 2017 Convertible Loan, (iv) 400,000 shares
of Common Stock issuable upon exercise of Series A Warrants, (v) 400,000 shares of Common Stock issuable upon exercise of
Series B Warrants , (vi) 392,055 shares of Common Stock issuable upon the exercise of the 2016 Investment Rights and (vii)
308,613 shares of Common Stock issuable upon the exercise of the 2017 Investment Rights. Rimon Gold is an Israeli private
company wholly owned by the Goldfinger Trust (the “Trust”), whose trustee is Abir Raveh (the “Trustee”)
and whose beneficiary is Yair Goldfinger. The Trust directs the management of Rimon Gold, its investment and voting decisions
and the Trustee directs the management of the Trust, its investment and voting decisions. The address of Rimon Gold, the Trust
and the Trustee is 32 Habarzel, Tel Aviv, Israel. Mr. Goldfinger does not direct the management of Rimon Gold, the Trust or
the Trustee, its investment or voting decisions and disclaims beneficial ownership of the shares reported in this table.
|
(2)
|
Represents
(i) 1,040,760 shares of Common Stock, (ii) 264,709 shares of Common Stock issuable upon the conversion of the Convertible
Loans and (iii) 94,382 shares of Common Stock issuable upon the exercise of the Investment Rights. Ridge is a Seychelles corporation,
whose address is Room 206, Premier Building, P.O Box 332, Victoria, Mahe, Seychelles. Priscilla Julie is the sole director
of Ridge and holds the voting and dispositive power of the shares of Common Stock beneficially owned by Ridge. Noam Danenberg,
our Chairman, is married to Tali Danenberg Harpaz, who owns 49% of Ridge.
|
(3)
|
Represents
(i) 515,496 shares of Common Stock and (ii) 259,037 shares of Common Stock issuable upon the exercise of the 2017 Warrants.
The address for Mr. Zarachia is 10 Tzemach Tzedek Street, Lod, Israel.
|
(4)
|
Represents
(i) 567,974 shares of Common Stock and (ii) 114,869 shares of Common Stock issuable upon the exercise of the 2017 Warrants.
The address for Mr. Sadan is Hashunit 10, Herzliya, Israel.
|
(5)
|
Represents
(i) 213,524 shares of Common Stock, (ii) 264,544 shares of Common Stock issuable upon the conversion of the Convertible Loans
and (ii) 95,089 shares of Common Stock issuable upon the exercise of the Investment Rights. The address of Mr. Fisher is 3
HaRav Shmuel Rozovski Street, Bnei Brak, Israel.
|
|
|
(6)
|
Represents
(i) 250,000 shares of Common Stock, (ii) 250,000 shares of Common Stock issuable upon exercise of Series A Warrants and (iii)
250,000 shares of Common Stock issuable upon exercise of Series B Warrants. The address for Bigger Capital Fund, LP is 159
Jennings Road, Cold Spring Harbor, NY 11724. Michael Bigger, as the managing member of the general partner of Bigger Capital
Fund LP, has voting and dispositive power over securities of the Company held by Bigger Capital Fund LP.
|
|
|
(7)
|
Represents
(i) 250,000 shares of Common Stock, (ii) 250,000 shares of Common Stock issuable upon exercise of Series A Warrants and (iii)
250,000 shares of Common Stock issuable upon exercise of Series B Warrants. The address for District 2 Capital Fund, LP is
175 West Carver Street, Huntington, NY 11743. Eric Schlanger, as the general partner of District 2 Capital Fund LP, has voting
and dispositive power over securities of the Company held by District 2 Capital Fund LP.
|
|
|
(8)
|
Represents
(i) 418,702 shares of Common Stock, (ii) 178,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock,
(iii) 259,037 shares of Common Stock issuable upon the exercise of the 2017 Warrants, (iv) 350,000 shares of Common Stock
issuable upon exercise of Series A Warrants and (v) 350,000 shares of Common Stock issuable upon exercise of Series B Warrants.
The address for Mr. Rubini is 2655 Marston Drive, Anchorage, Alaska 99517.
|
|
|
(9)
|
Represents(i)
66,259 shares of Common Stock which are held by Mr. Mayron, including 40,000 shares of Common Stock which were issued upon
the vesting of RSUs that were granted by us on April 4, 2018 and (ii) 11,625 shares of Common Stock issuable upon the exercise
of stock options currently exercisable or exercisable within 60 days of November 20, 2018. Mr. Mayron resigned from our Board
on November 7, 2018.
|
|
|
(10)
|
Represents
6,249 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days
of November 20, 2018.
|
|
|
(11)
|
Represents
8,425 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days
of November 20, 2018.
|
|
|
(12)
|
Represents
6,249 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days
of November 20, 2018.
|
|
|
(13)
|
Represents
6,249 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days
of November 20, 2018.
|
|
|
(14)
|
Represents
(i) 40,100 shares of Common Stock which were issued to Mr. Eisenberg upon the vesting of RSUs that were granted by us on April
4, 2018 and (ii) 9,000 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable
within 60 days of November 20, 2018. See footnote 2 above.
|
|
|
(15)
|
Represents
(i) 58,415 shares of Common Stock which are held by a company where Mr. Danenberg holds a minority interest and he does not
serve as a director or an officer, (ii) 40,100 shares of Common Stock which were issued to Danenberg Holdings, a services
company wholly owned by Mr. Danenberg, upon the vesting of RSUs that were granted by us on April 4, 2018 and (iii) 9,000 shares
of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days of November
20, 2018. See footnote 2 above.
|
|
|
(16)
|
Represents
(i) 204,874 shares of Common Stock, including 120,200 shares of Common Stock which were issued upon the vesting of RSUs that
were granted by us on April 4, 2018 and (ii) 56,797 shares of Common Stock issuable upon the exercise of stock options currently
exercisable or exercisable within 60 days of November 20, 2018.
|
RELATED
PARTY TRANSACTIONS
Described
below are the transactions and series of similar transactions since January 1, 2017 to which we were a party in which:
|
●
|
the
amounts involved exceeded the lesser of $120,000 or one percent of our total assets at year end for the last two completed
fiscal years; and
|
|
●
|
any
of the directors, executive officers, holders of more than 5% of our share capital, or any member of their respective immediate
family had or will have a direct or indirect material interest.
|
Wize
Israel Loan Agreements and the 2017 Private Placement
On
January 15, 2017, Wize Israel entered into the 2017 Loan Agreement with Ridge, and, by way of entering into assignments and assumption
agreements following such date, also with Rimon Gold and Fisher. Prior to entering into the 2017 Loan Agreement, Wize Israel entered
into the Ridge Interim Loans with Ridge. On June 23, 2017, Wize Israel entered into the 2017 PIPE Agreements with each of Peretz,
Zarachia, Sadan and Rubini. Each of Ridge, Rimon Gold, Fisher, Peretz, Zarachia, Sadan and Rubini beneficially held more than
5% of the share capital of Wize Israel as a result of such transactions.
In
connection with the October 2018 private placement, on October 19, 2018 the Company and Wize Israel entered into an amendment
to convertible loan agreements with Rimon Gold, Ridge and Fisher (the “Loan Agreements Amendment”). Pursuant to the
Loan Agreements Amendment, the maturity date (the “Loan Agreements Maturity Date”) under the 2016 Loan Agreement and
the 2017 Loan Agreement was amended to be the earliest of (a) 90 days following the date that the registration statement of which
this prospectus forms a part is declared effective by the SEC, (b) 90 days following the date on which all securities issued to
investors in the October 2018 private placement are no longer deemed “registrable securities” under the Registration
Rights Agreement (as defined below), and (c) October 24, 2019. In addition, pursuant to the Loan Agreements Amendment, the expiration
date of the investment right under the 2016 Loan Agreement and the 2017 Loan Agreement was amended to be 180 days after the Loan
Agreements Maturity Date.
For
more information relating to the Convertible Loans, the agreements relating thereto and the 2017 PIPE Agreements, please see “MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS,” beginning on page 64
of this prospectus.
Agreements
with Executive Officers and Directors
Agreements
with Wize Israel’s Directors and Executive Officers.
Mr.
Noam Danenberg, our Chairman and Former Chief Operating Officer and Wize Israel’s strategic advisor, is also the husband
of Tali Harpaz who owns 49% of Ridge.
Wize
Israel has entered into employment, services and other agreements with certain of its directors and executive officers. For more
information regarding these other agreements entered into by Wize Israel with certain of its directors and executive officers,
please see “EXECUTIVE COMPENSATION — Executive Employment Agreements,” beginning on page 77
of this prospectus, “EXECUTIVE COMPENSATION — Compensation of Directors --
Services Agreement with Ron Mayron
,”
beginning on page 80 of this prospectus, “EXECUTIVE COMPENSATION — Compensation
of Directors –
Consulting Agreement with Ron Mayron
,” beginning on page 80
of this prospectus and “EXECUTIVE COMPENSATION — Compensation of Directors --
Finder’s Fee Agreement
with Joseph Zarzewsky
,” on page 81
of this prospectus.
Voting
and Undertaking Agreement
Concurrently
with the execution of the Merger Agreement and as contemplated therein, Can-Fite entered into a Voting and Undertaking Agreement
with us and Wize Israel (the “Voting and Undertaking Agreement”), pursuant to which Can-Fite agreed to vote our shares
held by it in favor of approving the matters on the agenda of the 2017 Annual Meeting and against any actions that could adversely
affect the consummation of the Merger. In addition, the Voting and Undertaking Agreement placed certain restrictions on the transfer
of our shares held by Can-Fite. Furthermore, Can-Fite agreed to indemnify us and Wize Israel with respect to certain of our liabilities
occurring in the period up to the closing of the Merger but excluding certain liabilities in respect of any legal proceedings
arising out of or related to the transactions contemplated by the Merger Agreement.
Can-Fite
Agreements
On
November 21, 2011, we entered into the Can-Fite License Agreement with Eyefite and Can-Fite. As a condition to closing of the
Merger, the Can-Fite License Agreement was required to be terminated pursuant to a Termination of License Agreement, which was
entered into by Can-Fite and Eyefite on the Closing Date. On November 21, 2011, EyeFite and Can-Fite entered into the Can-Fite
Services Agreement. As a condition to closing of the Merger, the Can-Fite Services Agreement was required to be terminated pursuant
to a Termination of Services Agreement, which was entered into by Can-Fite, Eyefite and us on the Closing Date. Pursuant to the
Termination of Services Agreement, Can-Fite waived any and all payments owed to it by us under the Services Agreement and outstanding
as of the Effective Date so that any and all such amounts were waived and cancelled.
Can-Fite
was our majority stockholder prior to the Effective Time. Dr. Fishman, our former Chief Executive Officer and Chairman, is also
the Chief Executive Officer of Can-Fite and Messrs. Cohn and Regev, both our former directors, are also directors of Can-Fite.
Itay Weinstein, our former Chief Financial Officer, is the controller of Can-Fite.
DESCRIPTION
OF CAPITAL STOCK
The
following summary is a description of the material terms of our share capital. We encourage you to read our Certificate of Incorporation,
as amended, and Amended and Restated By-laws which have been filed with the SEC.
The
rights of our stockholders are be governed by Delaware law, Certificate of Incorporation and Bylaws, as amended. The following
briefly summarizes the material terms of our Common Stock and preferred stock. We urge you to read the applicable provisions of
the DGCL, our Certificate of Incorporation and our Bylaws.
Authorized
Capital Stock
Our
authorized capital stock consists of 500,000,000 shares of common stock, par value $0.001 per share, and 1,000,000 shares of preferred
stock, no par value per share. As of November 20, 2018, there were 8,462,550 shares of our Common Stock outstanding and 1,350 shares
of preferred stock outstanding consisting of 1,350 shares of Series A Preferred Stock.
Common
Stock
We
are authorized to issue up to a total of 500,000,000 shares of common stock, par value $0.001 per share. Holders of our Common
Stock are entitled to one vote for each share held on all matters submitted to a vote of our stockholders. Holders of our Common
Stock have no cumulative voting rights. Further, holders of our Common Stock have no preemptive or conversion rights or other
subscription rights. Upon our liquidation, dissolution or winding-up, holders of our Common Stock are entitled to share in all
assets remaining after payment of all liabilities and the liquidation preferences of any of our outstanding shares of preferred
stock. Subject to preferences that may be applicable to any outstanding shares of preferred stock, holders of our Common Stock
are entitled to receive dividends, if any, as may be declared from time to time by our Board out of our assets which are legally
available. Such dividends, if any, are payable in cash, in property or in shares of capital stock.
The
holders of shares of our Common Stock are entitled to cast at least 33⅓ of the total votes entitled to be cast by the holders
of all of our outstanding capital stock, present in person or by proxy, are necessary to constitute a quorum at any meeting. If
a quorum is present, an action by stockholders entitled to vote on a matter is approved if the number of votes cast in favor of
the action exceeds the number of votes cast in opposition to the action, with the exception of the election of directors, which
requires a plurality of the votes cast, represented in person or by proxy, necessary to constitute a quorum for the transaction
of business at any meeting. If a quorum is present, an action by stockholders entitled to vote on a matter is approved if the
number of votes cast in favor of the action exceeds the number of votes cast in opposition to the action, with the exception of
the election of directors, which requires a plurality of the votes cast.
On
March 5, 2018, we effected the Reverse Stock Split.
Preferred
Stock
We
are authorized to issue up to a total of 1,000,000 shares of preferred stock, no par value per share, without stockholder approval.
The preferred stock may be issued from time to time in one or more series, each series to be appropriately designated by a distinguishing
letter or title prior to the issuance of any shares thereof, as determined by our Board. Our Certificate of Incorporation expressly
authorizes (subject to the rights of the holders of any series of preferred stock pursuant to the terms of our Certificate of
Incorporation or any resolution or resolutions providing for the issuance of such series of stock adopted by the board of directors)
the increase or decrease (but not below the number of shares of such series then outstanding) of the number of shares of any series
subsequent to the issuance of shares of that series by the affirmative vote of the holders of a majority of the Common Stock irrespective
of the provisions of Section 242(b)(2) of the DGCL.
Our
Board may authorize the issuance of preferred stock with voting or conversion rights that could harm the voting power or other
rights of the holders of the Common Stock. The issuance of preferred stock, while providing flexibility in connection with possible
acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change
in control of us and might harm the market price of our Common Stock and the voting and other rights of the holders of Common
Stock. We have no current plans to issue any shares of our preferred stock.
Series
A Preferred Stock
October
22, 2018, the Company filed a Certificate of Designations of Series A Preferred Stock (the “Series A Certificate of Designations”)
with the Secretary of State of Delaware. Pursuant to the Series A Certificate of Designations, the Company designated 1,350 shares
of preferred stock as Series A Preferred Stock. The Series A Preferred Stock has a stated value of $1,000 per share and is convertible
into shares of Common Stock in an amount determined by dividing the stated value of $1,000 by the conversion price of $1.00, such
that each share of Series A Preferred Stock is convertible into 1,000 shares of Common Stock. The Series A Preferred Stock may
not be converted into Common Stock to the extent such conversion would cause the holder to beneficially own more than 4.99% (or
9.99%, at the election of the investor) of the Company’s outstanding Common Stock. The Series A Preferred Stock is entitled
to dividends on an as-converted basis with the Common Stock. The Series A Preferred Stock votes with the Common Stock on an as-converted
basis, subject to the beneficial ownership limitation.
Anti-Takeover
Provisions of Delaware Law, Our Certificate of Incorporation and Bylaws
The
provisions of Delaware law, our Certificate of Incorporation and our Bylaws could discourage or make it more difficult to accomplish
a proxy contest or other change in our management or the acquisition of control by a holder of a substantial amount of our voting
stock. It is possible that these provisions could make it more difficult to accomplish, or could deter, transactions that stockholders
may otherwise consider to be in their best interests or in our best interests. These provisions are intended to enhance the likelihood
of continuity and stability in the composition of our Board and in the policies formulated by our Board and to discourage certain
types of transactions that may involve an actual or threatened change of our control. These provisions are designed to reduce
our vulnerability to an unsolicited acquisition proposal and to discourage certain tactics that may be used in proxy fights. Such
provisions also may have the effect of preventing changes in our management.
Delaware
Statutory Business Combinations Provision
We
are subject to the anti-takeover provisions of Section 203 of the DGCL. Section 203 prohibits a publicly-held Delaware corporation
from engaging in a “business combination” with an “interested stockholder” for a period of three (3) years
after the date of the transaction in which the person became an interested stockholder, unless the business combination is, or
the transaction in which the person became an interested stockholder was, approved in a prescribed manner or another prescribed
exception applies. For purposes of Section 203, a “business combination” is defined broadly to include a merger, asset
sale or other transaction resulting in a financial benefit to the interested stockholder, and, subject to certain exceptions,
an “interested stockholder” is a person who, together with his or her affiliates and associates, owns, or within three
(3) years prior, did own, 15% or more of the corporation’s voting stock.
Advance
Notice Provisions for Stockholder Proposals and Stockholder Nominations of Directors
Our
Bylaws provide that, for nominations to our Board or for other business to be properly brought by a stockholder before a meeting
of stockholders, the stockholder must first have given timely notice of the proposal in writing to our secretary at our principal
offices. For an annual meeting, a stockholder’s notice generally must be delivered not less than 45 days nor more than 75
days prior to the one-year anniversary of the date on which we first mailed our proxy materials for the preceding year’s
annual meeting of stockholders. For an annual meeting, the notice must generally be delivered not later than the close of business
on the later of the 90
th
day prior to such annual meeting or the 10
th
day following the day on which public
announcement is first made. Detailed requirements as to the form of the notice and information required in the notice are specified
in our Bylaws. If it is determined that business was not properly brought before a meeting in accordance with our Bylaws, such
business will not be conducted at the meeting.
Special
Meetings of Stockholders
Special
meetings of the stockholders may be called only by either (i) the chairman of our Board, chief executive officer, or the president,
(ii) by our Board pursuant to a resolution adopted by a majority of the total number of directors which we would have if there
were no vacancies, or (iii) by the holders of 20% of the total votes entitled to be cast by the holders of all our outstanding
capital stock entitled to vote generally in an election of directors.
Stockholder
Action by Written Consent
Each
of our Certificate of Incorporation and our Bylaws permit our stockholders to act by written consent.
Super
Majority Stockholder Vote Required for Certain Actions
The
DGCL generally provides that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend
a corporation’s certificate of incorporation or bylaws, unless the corporation’s certificate of incorporation or bylaws,
as the case may be, requires a greater percentage. Our Certificate of Incorporation requires the affirmative vote of the holders
of at least 66⅓ of our outstanding voting stock to amend or repeal any provision of the our Bylaws or any amend or repeal
any provision of our Certificate of Incorporation relating to limitation of director liability, indemnification and advancement
of expenses or amendments to our Certificate of Incorporation or our Bylaws. All other provisions of our Certificate of Incorporation
may be amended or repealed by a simple majority vote of our Board.
Transfer
Agent and Registrar
The
transfer agent and registrar for our Common Stock is VStock Transfer LLC.
Stock
Market Listing
Our
Common Stock is currently quoted on OTCQB and trades under the symbol “WIZP.”
OCTOBER
2018 PRIVATE PLACEMENT
On
October 22, 2018, the Company entered into a securities purchase agreement (the “Purchase Agreement”), with accredited
investors. Pursuant to the Purchase Agreement, the Company agreed to sell to the investors, and the investors agreed to purchase
from the Company, in a private placement, an aggregate of (i) 3,100,000 shares of Common Stock, for a purchase price of $1.00
per share, and (ii) 1,350 shares of newly created Series A Preferred Stock (each convertible into 1,000 shares of Common Stock),
for a purchase price of $1,000 per share, for aggregate gross proceeds under the Purchase Agreement of $4,450,000. The Company
also agreed to issue to the investors Series A Warrants to purchase an aggregate of 4,450,000 shares of Common Stock (equal to
100% of the shares of Common Stock sold (on an as-converted basis with respect to shares of Series A Preferred Stock)), and Series
B Warrants to purchase an aggregate of 4,450,000 shares of Common Stock (equal to 100% of the shares of Common Stock sold (on
an as-converted basis with respect to shares of Series A Preferred Stock)). The Series A Warrants will have an exercise price
of $1.10 per share, and the Series B Warrants will have an exercise price of $1.00 per share. The transactions contemplated by
the Purchase Agreement closed on October 24, 2018, 2018. The investors under the Purchase Agreement include prior investors in
the Company and a lender to the Company.
The
Series A Warrants, when issued, will have a term of 5 years from issuance, and the Series B Warrants will have a term that expires
20 days following the later of (i) the public announcement of Phase II clinical data for LO2A and (ii) six months following the
issuance date, provided that, for each day after the issuance date that an Equity Conditions Failure (as defined in the Series
B Warrants) has occurred, the expiration date of the Series B Warrants will be extended by one day.
In
the event that, during the period commencing upon execution of the Purchase Agreement, and expiring on the trading day immediately
following the date that the Company has raised, beginning after the issuance date of the warrants, at least $10 million in gross
proceeds from the issuance of the Company’s securities, the Company issues or sells Common Stock (or securities convertible
into or exercisable into Common Stock) at a purchase price (or conversion or exercise price, as applicable) lower than the exercise
price of the warrants, than the exercise price of the Warrants will be reduced to such lower price, subject to certain exceptions.
The
Warrants will be exercisable on a cashless basis in the event that, six months after the closing of the Purchase Agreement, there
is not an effective registration statement for the resale of the shares underlying the warrants. The warrants may not be exercised
to the extent such exercise would cause the holder to beneficially own more than 4.99% (or 9.99%, at the election of the investor)
of the Company’s outstanding Common Stock.
Pursuant
to the Purchase Agreement, the Company agreed that it will not, for a period commencing upon the closing of the Purchase Agreement,
until the earlier of (i) 150 days following the date that all of the Common Stock, issued pursuant to the Purchase Agreement,
and issuable upon conversion of the Series A Preferred Stock and exercise of the Warrants, are registered for resale, (ii) six
months after the date that a non-affiliate investor under the Purchase Agreement may first sell securities purchased thereunder
under Rule 144, (iii) 120 days following the listing of the Common Stock on a Qualified Market (as defined below) and (iv) the
first trading day that the weighted average price of the Common Stock exceeds $5.00 per share for 10 consecutive trading days
occurring after the date that a registration statement covering the resale of all of the Common Stock, issued pursuant to the
Purchase Agreement, and issuable upon conversion of the Series A Preferred Stock and exercise of the Warrants, are registered
for resale, offer or sell any Common Stock (or securities convertible into or exercisable into Common Stock), or file any registration
statement, other than pursuant to the Registration Rights Agreement or on Form S-8, subject to certain exceptions.
Pursuant
to the Purchase Agreement, the Company granted to the investors thereunder, for a period of three years from the closing date
of the Purchase Agreement, a right of participation of up to an aggregate of 35% in any subsequent offering of the Company, subject
to certain exceptions.
In
connection with the Purchase Agreement, on October 22, 2018, the Company filed a Certificate of Designations of Series A Preferred
Stock (the “Series A Certificate of Designations”) with the Secretary of State of Delaware. Pursuant to the Series
A Certificate of Designations, the Company designated 1,350 shares of preferred stock as Series A Preferred Stock. The Series
A Preferred Stock has a stated value of $1,000 per share and is convertible into shares of Common Stock in an amount determined
by dividing the stated value of $1,000 by the conversion price of $1.00, such that each share of Series A Preferred Stock is convertible
into 1,000 shares of Common Stock. The Series A Preferred Stock may not be converted into Common Stock to the extent such conversion
would cause the holder to beneficially own more than 4.99% (or 9.99%, at the election of the investor) of the Company’s
outstanding Common Stock. The Series A Preferred Stock is entitled to dividends on an as-converted basis with the Common Stock.
The Series A Preferred Stock votes with the Common Stock on an as-converted basis, subject to the beneficial ownership limitation.
In
connection with the Purchase Agreement, on October 22, 2018, the Company entered into a registration rights agreement (the “Registration
Rights Agreement”) with the investors. Pursuant to the Registration Rights Agreement, the Company will be required to file
a resale registration statement (the "Registration Statement") with the Securities and Exchange Commission (the “SEC”)
to register for resale of the shares of Common Stock, the shares underlying the Series A Preferred Stock, and the shares underlying
the warrants sold in the private placement, within 30 days of the closing date of the private placement, and to have such Registration
Statement declared effective within 90 days after the closing date in the event the Registration Statement is not reviewed by
the SEC, or 120 days of the closing date in the event the Registration Statement is reviewed by the SEC. The Company will be obligated
to pay liquidated damages to the investors if the Company fails to file the resale registration statement when required, fails
to cause the Registration Statement to be declared effective by the SEC when required, the Company fails to maintain the Registration
Statement or, in certain circumstances, if the Company fails to timely file its periodic reports under the Securities Exchange
Act of 1934.
The
Company engaged ThinkEquity, a division of Fordham Financial Management, Inc. (“ThinkEquity”), as the placement agent
for the private placement, pursuant a placement agency agreement between the Company and ThinkEquity (the “Placement Agency
Agreement”). The Company has paid ThinkEquity a fee equal to 8% of the gross proceeds, excluding proceeds received from
certain investors for its services as placement agent, and will issue to ThinkEquity or its designees warrants to purchase 267,000
shares of Common Stock (equal to 6% of the shares of Common Stock sold (on an as-converted basis with respect to shares of Series
A Preferred Stock)). Such warrants have an exercise price of $1.00 per share and otherwise have the same terms as the Series A
Warrants issued to the investors. The Company has paid to ThinkEquity a non-accountable expense allowance of $30,000 and reimbursed
ThinkEquity for its legal expenses in connection with the offering in the amount of $50,000. The Company granted to ThinkEquity
a right of first refusal for a period of nine months following the closing of the offering, to act as sole financial advisor,
sole investment banker, sole book-runner, and/or sole placement agent, for each and every future public and private equity and
debt offering of the Company during such period, on terms and conditions customary to ThinkEquity. The Company also paid Mesodi
Consultation& Investments, Ltd. (“Mesodi”) a fee of $89,000 and has issued to Mesodi the Advisor Warrants to purchase
89,000 shares of Common Stock at an exercise price of $1.10 per share. Such warrants have the same terms as the Series A Warrants
issued to the investors, in connection with the private placement.
SELLING
STOCKHOLDERS
The
shares of Common Stock being offered by the selling stockholders are those previously issued to the selling stockholders and those
shares issuable upon conversion of the Series A Preferred Stock and upon exercise of the Series A Warrants and Series B Warrants.
For additional information regarding the issuances of the Common Stock, the Series A Preferred Stock, the Series A Warrants, the
Series B Warrants, the Placement Agent Warrants and the Mesodi Warrants, see the section entitled “
October
2018 Private Placement
,” beginning on page 90 of this prospectus. We
are registering the shares of Common Stock in order to permit the selling stockholders to offer the shares for resale from time
to time. Except as set forth in the table below and for the ownership of the shares of Common Stock and the shares of Common Stock
underlying the Series A Preferred Stock, the Series A Warrants, the Series B Warrants, the Placement Agent Warrants and the Mesodi
Warrants, or prior investments in or loans to the Company, the selling stockholders have not had any material relationship with
us within the past three years.
The
table below lists the selling stockholders and other information regarding the beneficial ownership of the shares of Common Stock
by each of the selling stockholders. The second column lists the number of shares of Common Stock beneficially owned by each selling
stockholder, based on its ownership of Common Stock, the Series A Preferred Stock, the Series A Warrants, the Series B Warrants,
the Placement Agent Warrants and the Mesodi Warrants, as of November 20, 2018, assuming conversion of all Series A Preferred
Stock and exercise of the the 2018 Warrants held by the selling stockholders on that date, without regard to any limitations on
conversions and/or redemptions of the Series A Preferred Stock or exercises of the 2018 Warrants.
The
third column lists the shares of Common Stock being offered by this prospectus by the selling stockholders.
In
accordance with the terms of a registration rights agreement with the investors in the 2018 Private Placement, this
prospectus generally covers the resale of at least a number of shares of Common Stock equal to the sum of (i) the number of
shares of Common Stock issued, (ii) the maximum number of shares of Common Stock issued and issuable pursuant to the Series A
Preferred Stock as of the Trading Day immediately preceding the date the registration statement is initially filed with the
SEC, and (ii) the maximum number of shares of Common Stock issued and issuable upon exercise of the related warrants as of
the Trading Day immediately preceding the date the registration statement is initially filed with the SEC, all subject to
adjustment as provided in the registration rights agreement and in each case without regard to any limitations on the
issuance of shares of Common Stock pursuant to the terms of the Series A Preferred Stock or exercise of the warrants. Because
the conversion price of the Series A Preferred Stock may be adjusted, the number of shares that will actually be issued may
be more or less than the number of shares being offered by this prospectus. The fourth and fifth columns assume the sale of
all of the shares offered by the selling stockholders pursuant to this prospectus.
Under
the terms of the Series A Preferred Stock and the 2018 Warrants, a selling stockholder may not convert the Series A Preferred
Stock or exercise the warrants, to the extent such conversion or exercise would cause such selling stockholder, together with
its affiliates, to beneficially own a number of shares of Common Stock which would exceed either 4.99% or 9.99% of our then outstanding
shares of Common Stock following such conversion or exercise, excluding for purposes of such determination shares of Common Stock
issuable upon conversion of the Series A Preferred Stock which have not been converted and upon exercise of the warrants which
have not been exercised. The number of shares in the table below do not reflect this limitation. The selling stockholders may
sell all, some or none of their shares in this offering. See the section entitled “
PLAN
OF DISTRIBUTION
,” beginning on page 95 of this prospectus.
Name of Selling Stockholder
|
|
Number of Shares of Common Stock Owned Prior to Offering
|
|
|
Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus
|
|
|
Number of Shares of Common Stock Owned After Offering
|
|
|
Percentage of Common Stock Owned After the Offering
|
|
Empery Asset Master, Ltd. (1)
|
|
|
993,519
|
(2)
|
|
|
993,519
|
(2)
|
|
|
-
|
|
|
|
-
|
|
Empery Tax Efficient, LP (3)
|
|
|
162,231
|
(4)
|
|
|
162,231
|
(4)
|
|
|
-
|
|
|
|
-
|
|
Empery Tax Efficient II, LP (5)
|
|
|
1,094,250
|
(6)
|
|
|
1,094,250
|
(6)
|
|
|
-
|
|
|
|
-
|
|
Bigger Capital Fund, LP (7)
|
|
|
750,000
|
(8)
|
|
|
750,000
|
(8)
|
|
|
-
|
|
|
|
-
|
|
Dagiel Pekatch (9)
|
|
|
450,000
|
(10)
|
|
|
450,000
|
(10)
|
|
|
-
|
|
|
|
-
|
|
David Ichai (11)
|
|
|
150,000
|
(12)
|
|
|
150,000
|
(12)
|
|
|
-
|
|
|
|
-
|
|
D-Beta One EQ, Ltd. (13)
|
|
|
1,050,000
|
(14)
|
|
|
1,050,000
|
(14)
|
|
|
-
|
|
|
|
-
|
|
District 2 Capital Fund L.P. (15)
|
|
|
750,000
|
(8)
|
|
|
750,000
|
(8)
|
|
|
-
|
|
|
|
-
|
|
Richard Dyke Rogers (16)
|
|
|
150,000
|
(12)
|
|
|
150,000
|
(12)
|
|
|
-
|
|
|
|
-
|
|
Jonathan Rubini (17)
|
|
|
1,555,739
|
(18)
|
|
|
1,050,000
|
(14)
|
|
|
505,739
|
(19)
|
|
|
2.44
|
%
|
Moshe Zuk (20)
|
|
|
750,000
|
(8)
|
|
|
750,000
|
(8)
|
|
|
-
|
|
|
|
-
|
|
Ramnarain Jaigobind+
|
|
|
347,535
|
(21)
|
|
|
347,535
|
(21)
|
|
|
-
|
|
|
|
-
|
|
Rimon Gold Assets Ltd (22)
|
|
|
2,988,117
|
(23)
|
|
|
1,200,000
|
(24)
|
|
|
1,788,117
|
(25)
|
|
|
8.61
|
%
|
Shlomo Ben Nasser (26)
|
|
|
150,000
|
(12)
|
|
|
150,000
|
(12)
|
|
|
-
|
|
|
|
-
|
|
Yoav Asulin (27)
|
|
|
300,000
|
(28)
|
|
|
300,000
|
(28)
|
|
|
-
|
|
|
|
-
|
|
Ziv Reznik (29)
|
|
|
300,000
|
(28)
|
|
|
300,000
|
(28)
|
|
|
-
|
|
|
|
-
|
|
Alpha Capital Anstalt (30)
|
|
|
2,250,000
|
(31)
|
|
|
2,250,000
|
(31)
|
|
|
-
|
|
|
|
-
|
|
Sabby Volatility Warrant Master Fund, Ltd. (32)
|
|
|
1,500,000
|
(33)
|
|
|
1,500,000
|
(33)
|
|
|
-
|
|
|
|
-
|
|
Fordham Financial Management, Inc.(34)
|
|
|
53,400
|
(35)
|
|
|
53,400
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Chirag Choudhary+
|
|
|
25,000
|
(35)
|
|
|
25,000
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Eric Lord+
|
|
|
36,054
|
(35)
|
|
|
36,054
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Kevin Mangan+
|
|
|
31,222
|
(35)
|
|
|
31,222
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Priyanka Mahajan+
|
|
|
27,768
|
(35)
|
|
|
27,768
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Nelson Baquet+
|
|
|
10,000
|
(35)
|
|
|
10,000
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Maria Robles+
|
|
|
401
|
(35)
|
|
|
401
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Craig Skop+
|
|
|
13,751
|
(35)
|
|
|
13,751
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Philippe Allain+
|
|
|
1,068
|
(35)
|
|
|
1,068
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Jeffrey Singer+
|
|
|
801
|
(35)
|
|
|
801
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Ryan Konik+
|
|
|
10,000
|
(35)
|
|
|
10,000
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Timothy Regan+
|
|
|
10,000
|
(35)
|
|
|
10,000
|
(35)
|
|
|
-
|
|
|
|
-
|
|
Mesodi Consultation & Investments, Ltd. (36)
|
|
|
116,778
|
(37)
|
|
|
89,000
|
(38)
|
|
|
27,778
|
(39)
|
|
|
*
|
|
+
|
Referenced selling stockholder is affiliated with ThinkEquity,
a division of Fordham Financial Management, Inc., a registered broker dealer, and the placement agent for the October 2018 private
placement. The address of such selling stockholder is c/o ThinkEquity, 17 State Street, 22nd Fl, New York, NY 10004.
|
(1)
|
Empery Asset Management LP, the authorized agent of
Empery Asset Master Ltd (“EAM”), has discretionary authority to vote and dispose of the shares held by EAM and may
be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery
Asset Management LP, may also be deemed to have investment discretion and voting power over the shares held by EAM. EAM, Mr. Hoe
and Mr. Lane each disclaim any beneficial ownership of these shares. The business address for each of EAM, Empery Asset Management
LP and Messrs. Hoe and Lane is c/o Empery Asset Management, LP, 1 Rockefeller Plaza, Suite 1205, New York, NY 10020.
|
|
|
(2)
|
Represents (i) 183,173 shares of Common Stock, (ii)
148,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock, (iii) 331,173 shares of Common Stock issuable
upon exercise of Series A Warrants and (iv) 331,173 shares of Common Stock issuable upon exercise of Series B Warrants.
|
|
|
(3)
|
Empery Asset Management LP, the authorized agent of
Empery Tax Efficient, LP (“ETE”), has discretionary authority to vote and dispose of the shares held by ETE and may
be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers of Empery
Asset Management LP, may also be deemed to have investment discretion and voting power over the shares held by ETE. ETE, Mr. Hoe
and Mr. Lane each disclaim any beneficial ownership of these shares. The business address for each of ETE, Empery Asset Management
LP and Messrs. Hoe and Lane is c/o Empery Asset Management, LP, 1 Rockefeller Plaza, Suite 1205, New York, NY 10020.
|
(4)
|
Represents (i) 30,077 shares of Common Stock, (ii) 24,000
shares of Common Stock issuable upon conversion of Series A Preferred Stock, (iii) 54,077 shares of Common Stock issuable upon
exercise of Series A Warrants and (iv) 54,077 shares of Common Stock issuable upon exercise of Series B Warrants.
|
|
|
(5)
|
Empery Asset Management LP, the authorized agent of
Empery Tax Efficient II, LP (“ETE II”), has discretionary authority to vote and dispose of the shares held by ETE
II and may be deemed to be the beneficial owner of these shares. Martin Hoe and Ryan Lane, in their capacity as investment managers
of Empery Asset Management LP, may also be deemed to have investment discretion and voting power over the shares held by ETE II.
ETE II, Mr. Hoe and Mr. Lane each disclaim any beneficial ownership of these shares. The business address for each of ETE II,
Empery Asset Management LP and Messrs. Hoe and Lane is c/o Empery Asset Management, LP, 1 Rockefeller Plaza, Suite 1205, New York,
NY 10020.
|
|
|
(6)
|
Represents (i) 200,750 shares of Common Stock, (ii)
164,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock, (iii) 364,750 shares of Common Stock issuable
upon exercise of Series A Warrants and (iii) 364,750 shares of Common Stock issuable upon exercise of Series B Warrants.
|
|
|
(7)
|
Michael Bigger, as the managing member of the general
partner of Bigger Capital Fund LP, has voting and dispositive power over securities of the Company held by Bigger Capital Fund
LP. The address for Bigger Capital Fund, LP is 159 Jennings Road, Cold Spring Harbor, NY 11724.
|
|
|
(8)
|
Represents (i) 250,000 shares of Common Stock, (ii)
250,000 shares of Common Stock issuable upon exercise of Series A Warrants and (iii) 250,000 shares of Common Stock issuable upon
exercise of Series B Warrants.
|
|
|
(9)
|
The address for Dagiel Pekatch is 16 Tidhar St, Ramat
Efal, 52960, Israel.
|
|
|
(10)
|
Represents (i) 150,000 shares of Common Stock, (ii)
150,000 shares of Common Stock issuable upon exercise of Series A Warrants and (iii) 150,000 shares of Common Stock issuable upon
exercise of Series B Warrants.
|
|
|
(11)
|
The address for David Ichai is David Shimony 58, Jerusalem.
|
|
|
(12)
|
Represents (i) 50,000 shares of Common Stock, (ii) 50,000
shares of Common Stock issuable upon exercise of Series A Warrants and (iii) 50,000 shares of Common Stock issuable upon exercise
of Series B Warrants.
|
|
|
(13)
|
David Gonzalez, as the general counsel of D-Beta One
EQ, Ltd, has voting and dispositive power over securities of the Company held by D-Beta One EQ, Ltd. The address of D-Beta One
EQ, Ltd. is c/o Delta Beta Advisor, LLC 1012 Springfield Ave, Mountainside, NJ 07092.
|
|
|
(14)
|
Represents (i) 350,000 shares of Common Stock, (ii)
350,000 shares of Common Stock issuable upon exercise of Series A Warrants and (iii) 350,000 shares of Common Stock issuable upon
exercise of Series B Warrants.
|
|
|
(15)
|
Eric Schlanger, as the general partner of District 2
Capital Fund L.P., has voting and dispositive power over securities of the Company held by District 2 Capital Fund L.P. The address
of District 2 Capital Fund L.P. is 175 W. Carver St. Huntington, NY.
|
|
|
(16)
|
The address of Richard Dyke Rogers is PO Box 128 Dalhart,
TX 79022.
|
|
|
(17)
|
The address of Jonathan Rubini is PO Box 202845 Anchorage,
AK 99520.
|
|
|
(18)
|
Represents (i) 418,702 shares of Common Stock, (ii)
259,037 shares of Common Stock issuable upon exercise of Series 2017 PIPE Warrants (iii) 178,000 shares of Common Stock issuable
upon conversion of Series A Preferred Stock and (iv) 350,000 shares of Common Stock issuable upon exercise of Series A Warrants
(v) 350,000 shares of Common Stock issuable upon exercise of Series B Warrants
|
|
|
(19)
|
Represents (i) 246,702 shares of Common Stock and (ii)
259,037 shares of Common Stock issuable upon exercise of Series 2017 PIPE Warrants.
|
|
|
(20)
|
The address of Mark Zuk is Remez 15 Hod Hasheron, Israel.
|
|
|
(21)
|
Represents (i) 100,000 shares of Common Stock, (ii)
100,000 shares of Common Stock issuable upon exercise of Series A Warrants, (iii) 100,000 shares of Common Stock issuable upon
exercise of Series B Warrants and (iv) 47,535 shares of Common Stock issuable upon exercise of Placement Agent Warrants.
|
|
|
(22)
|
Rimon Gold is an Israeli private company wholly owned
by the Goldfinger Trust (the “Trust”), whose trustee is Abir Raveh (the “Trustee”) and whose beneficiary
is Yair Goldfinger. The Trust directs the management of Rimon Gold, its investment and voting decisions and the Trustee directs
the management of the Trust, its investment and voting decisions. The address of Rimon Gold, the Trust and the Trustee is 32 Habarzel,
Tel Aviv, Israel. Mr. Goldfinger does not direct the management of Rimon Gold, the Trust or the Trustee, its investment or voting
decisions and disclaims beneficial ownership of the shares reported in this table.
|
(23)
|
Represents (i) 617,442 shares of Common Stock, (ii)
400,000 shares of Common Stock issuable upon exercise of Series A Warrants, (iii) 400,000 shares of Common Stock issuable upon
exercise of Series B Warrants (iv) 605,298 shares of Common Stock issuable upon the conversion of the 2016 Convertible Loan, (v)
264,709 shares of Common Stock issuable upon the conversion of the 2017 Convertible Loan, (vi) 392,055 shares of Common Stock
issuable upon the exercise of the 2016 Investment Rights and (vii) 308,613 shares of Common Stock issuable upon the exercise of
the 2017 Investment Rights.
|
|
|
(24)
|
Represents (i) 400,000 shares of Common Stock, (ii)
400,000 shares of Common Stock issuable upon exercise of Series A Warrants and (iv) 400,000 shares of Common Stock issuable upon
exercise of Series B Warrants.
|
(25)
|
Represents (i) 217,442 shares of Common Stock, (ii)
605,298 shares of Common Stock issuable upon the conversion of the 2016 Convertible Loan, (iii) 264,709 shares of Common Stock
issuable upon the conversion of the 2017 Convertible Loan, (iv) 392,055 shares of Common Stock issuable upon the exercise of the
2016 Investment Rights and (v) 308,613 shares of Common Stock issuable upon the exercise of the 2017 Investment Rights.
|
|
|
(26)
|
The address of Shlomo Ben Nasser is 48 West 38th St.,
10th Fl. New York NY, 10018.
|
|
|
(27)
|
The address of Yoav Asulin is 10 Ramat Eshcol, Haifa,
Israel.
|
|
|
(28)
|
Represents (i) 100,000 shares of Common Stock, (ii)
100,000 shares of Common Stock issuable upon exercise of Series A Warrants and (iii) 100,000 shares of Common Stock issuable upon
exercise of Series B Warrants.
|
|
|
(29)
|
The address of Ziv Reznik is Neve Reim 24, Petach Tikva,
Israel.
|
|
|
(30)
|
Konrad Ackerman, as the director of Alpha Capital Anstalt,
has voting and dispositive power over securities of the Company held by Alpha Capital Anstalt. The address of Alpha Capital Anstalt
is c/o LH Financial Services Corp. 510 Madison Ave, Suite 1400 New York, NY 10022.
|
|
|
(31)
|
Represents (i) 414,000 shares of Common Stock, (ii)
336,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock, (iii) 750,000 shares of Common Stock issuable
upon exercise of Series A Warrants and (iv) 750,000 shares of Common Stock issuable upon exercise of Series B Warrants.
|
|
|
(32)
|
Sabby Management, LLC is the investment manager of Sabby
Volatility Warrant Master Fund, Ltd., or Sabby VWMF, and shares voting and investment power with respect to these shares in this
capacity. As manager of Sabby Management, LLC, Hal Mintz also shares voting and investment power on behalf of Sabby VWMF. Each
of Sabby Management, LLC and Hal Mintz disclaims beneficial ownership over the securities listed except to the extent of their
pecuniary interest therein. The address of principal business office of S Sabby VWMF is 10 Mountainview Road, Suite 205, Upper
Saddle River, New Jersey 07458.
|
|
|
(33)
|
Represents (i) 500,000 shares of Common Stock issuable
upon conversion of Series A Preferred Stock, (ii) 500,000 shares of Common Stock issuable upon exercise of Series A Warrants and
(iii) 500,000 shares of Common Stock issuable upon exercise of Series B Warrants.
|
|
|
(34)
|
William Baquet, as the President of Fordham Financial
Management, Inc., has voting and dispositive power over securities of the Company held by Fordham Financial Management, Inc. The
address of Fordham Financial Management, Inc. is is 17 Battery Place, Suite 643, New York, NY 10004.
|
|
|
(35)
|
Represents shares of Common Stock issuable upon exercise
of Placement Agent Warrants.
|
|
|
(36)
|
Uzie Ovits, as the managing director of Mesodi Consultation
& Investments, Ltd., has voting and dispositive power over securities of the Company held by Mesodi Consultation & Investments,
Ltd. The address of Mesodi Consultatiom & Investments, Ltd. is 3 Menora street, Tel Aviv, Israel.
|
|
|
(37)
|
Represents (i) 27,778 shares of Common Stock and (ii)
89,000 shares of Common Stock exercisable upon exercise of Adivsor Warrants.
|
PLAN
OF DISTRIBUTION
We
are registering the shares of Common Stock previously issued, the shares of Common Stock issuable upon conversion of the Series
A Preferred Stock and the shares of Common Stock issuable upon exercise of the 2018 Warrants from time to time after the date
of this prospectus. We will not receive any of the proceeds from the sale by the selling stockholders of the shares of Common
Stock. We will bear all fees and expenses incident to our obligation to register the shares of Common Stock.
The
selling stockholders may sell all or a portion of the shares of Common Stock beneficially owned by them and offered hereby from
time to time directly or through one or more underwriters, broker-dealers or agents. If the shares of Common Stock are sold through
underwriters or broker-dealers, the selling stockholders will be responsible for underwriting discounts or commissions or agent’s
commissions. The shares of Common Stock may be sold in one or more transactions at fixed prices, at prevailing market prices at
the time of the sale, at varying prices determined at the time of sale, or at negotiated prices. These sales may be effected in
transactions, which may involve crosses or block transactions,
|
●
|
on
any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;
|
|
●
|
in
the over-the-counter market;
|
|
●
|
in
transactions otherwise than on these exchanges or systems or in the over-the-counter market;
|
|
●
|
through
the writing of options, whether such options are listed on an options exchange or otherwise;
|
|
●
|
ordinary
brokerage transactions and transactions in which the broker-dealer solicits purchasers;
|
|
●
|
block
trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block
as principal to facilitate the transaction;
|
|
●
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its account;
|
|
●
|
an
exchange distribution in accordance with the rules of the applicable exchange;
|
|
●
|
privately
negotiated transactions;
|
|
●
|
sales
pursuant to Rule 144;
|
|
●
|
broker-dealers
may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;
|
|
●
|
a
combination of any such methods of sale; and
|
|
●
|
any
other method permitted pursuant to applicable law.
|
If
the selling stockholders effect such transactions by selling shares of Common Stock to or through underwriters, broker-dealers
or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions
from the selling stockholders or commissions from purchasers of the shares of Common Stock for whom they may act as agent or to
whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or
agents may be in excess of those customary in the types of transactions involved). In connection with sales of the shares of Common
Stock or otherwise, the selling stockholders may enter into hedging transactions with broker-dealers, which may in turn engage
in short sales of the shares of Common Stock in the course of hedging in positions they assume. The selling stockholders may also
sell shares of Common Stock short and deliver shares of Common Stock covered by this prospectus to close out short positions and
to return borrowed shares in connection with such short sales. The selling stockholders may also loan or pledge shares of Common
Stock to broker-dealers that in turn may sell such shares.
The
selling stockholders may pledge or grant a security interest in some or all of the convertible preferred shares or warrants or
shares of Common Stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of Common Stock from time to time pursuant to this prospectus or any amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list
of selling stockholders to include the pledgee, transferee or other successors in interest as selling stockholders under this
prospectus. The selling stockholders also may transfer and donate the shares of Common Stock in other circumstances in which case
the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
The
selling stockholders and any broker-dealer participating in the distribution of the shares of Common Stock may be deemed to be
“underwriters” within the meaning of the Securities Act, and any commission paid, or any discounts or concessions
allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act. At the
time a particular offering of the shares of Common Stock is made, a prospectus supplement, if required, will be distributed which
will set forth the aggregate amount of shares of Common Stock being offered and the terms of the offering, including the name
or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling
stockholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.
Under
the securities laws of some states, the shares of Common Stock may be sold in such states only through registered or licensed
brokers or dealers. In addition, in some states the shares of Common Stock may not be sold unless such shares have been registered
or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.
There
can be no assurance that any selling stockholder will sell any or all of the shares of Common Stock registered pursuant to the
registration statement, of which this prospectus forms a part.
The
selling stockholders and any other person participating in such distribution will be subject to applicable provisions of the Securities
Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the
Exchange Act, which may limit the timing of purchases and sales of any of the shares of Common Stock by the selling stockholders
and any other participating person. Regulation M may also restrict the ability of any person engaged in the distribution of the
shares of Common Stock to engage in market-making activities with respect to the shares of Common Stock. All of the foregoing
may affect the marketability of the shares of Common Stock and the ability of any person or entity to engage in market-making
activities with respect to the shares of Common Stock.
We
will pay all expenses of the registration of the shares of Common Stock pursuant to the registration rights agreement, estimated
to be $[ ] in total, including, without limitation, Securities and Exchange Commission
filing fees and expenses of compliance with state securities or “blue sky” laws; provided, however, that a selling
stockholder will pay all underwriting discounts and selling commissions, if any. We will indemnify the selling stockholders against
liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreements, or the
selling stockholders will be entitled to contribution. We may be indemnified by the selling stockholders against civil liabilities,
including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling stockholder
specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to
contribution.
Once
sold under the registration statement, of which this prospectus forms a part, the shares of Common Stock will be freely tradable
in the hands of persons other than our affiliates.
LEGAL
MATTERS
The
validity of the Common Stock being offered by this prospectus has been passed upon for us by Sichenzia Ross Ference LLP, New York,
New York.
EXPERTS
The
audited consolidated financial statements of Wize Pharma, Inc. and its subsidiaries, as of and for the years ended
December 31, 2017 and 2016 included in this prospectus, and elsewhere in the registration statement on Form S-1 have been so
included in reliance upon the report of Fahn Kanne & Co. Grant Thornton Israel, independent registered public
accountants, upon the authority of said firm as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
We
are subject to the informational requirements of the Exchange Act and in accordance therewith, file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and copy these reports, statements or other information
filed by us at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549, at prescribed rates. Call
the SEC at 1-800-SEC-0330 for further information on the operation of the Public Reference Room. In addition, we file reports,
proxy statements and other information with the SEC electronically, and the SEC maintains a website that contains our filings
as well as reports, proxy and information statements, and other information issuers file electronically with the SEC at
www.sec.gov
.
You
should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with different
information. Therefore, if anyone gives you different or additional information, you should not rely on it. The information contained
in this prospectus is correct as of its date. It may not continue to be correct after this date.
WIZE
PHARMA, INC. AND ITS SUBSIDIARIES
CONSOLIDATED
FINANCIAL STATEMENTS
U.S.
DOLLARS IN THOUSANDS
INDEX
|
Fahn
Kanne & Co.
|
|
Head
Office
|
|
32
Hamasger Street
Tel-Aviv
6721118, ISRAEL
PO
Box 36172, 6136101
|
|
|
|
T
+972 3 7106666
|
|
F
+972 3 7106660
|
|
www.gtfk.co.il
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Stockholders
WIZE PHARMA INC. (FORMERLY: OPHTHALIX INC.)
Opinion on the financial statements
We have audited the accompanying consolidated
balance sheets of Wize Pharma, Inc. (Formerly: OphthaliX, Inc.) (a Delaware corporation) and subsidiaries (the “Company”)
as of December 31, 2017 and 2016, the related consolidated statements of comprehensive loss, changes in stockholders’ deficit,
and cash flows for each of the two years in the period ended December 31, 2017, and the related notes (collectively referred to
as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects,
the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for
each of the two years in the period ended December 31, 2017, in conformity with accounting principles generally accepted in the
United States of America.
Going Concern
The accompanying consolidated financial
statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1b
to the financial statements, the Company has incurred net losses since its inception, and has not yet generated any revenues. As
of December 31, 2017, there is an accumulated deficit of $26,452. These conditions, along with other matters as set forth
in Note 1b, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans
in regards to these matters are also described in Note 1b. The consolidated financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis for opinion
These financial statements are the responsibility
of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based
on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have,
nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required
to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures
to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ FAHN KANNE & CO. GRANT THORNTON
ISRAEL
We have served as the Company’s
auditor since 2018.
Tel-Aviv, Israel
March 28, 2018
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
U.S. dollars in thousands (except share data)
|
|
As of December 31,
|
|
|
|
2017
|
|
|
2016
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
215
|
|
|
$
|
28
|
|
Restricted bank deposit
|
|
|
12
|
|
|
|
10
|
|
Marketable equity securities (Note 3)
|
|
|
323
|
|
|
|
-
|
|
Other current assets (Note 4)
|
|
|
40
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
Total
current assets
|
|
|
590
|
|
|
|
67
|
|
|
|
|
|
|
|
|
|
|
PROPERTY AND EQUIPMENT, NET
|
|
|
5
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
595
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
|
|
Trade payables
|
|
$
|
43
|
|
|
$
|
13
|
|
Other accounts payable (Note 7)
|
|
|
196
|
|
|
|
214
|
|
Current portion of license purchase obligation (Note 6)
|
|
|
250
|
|
|
|
150
|
|
Derivative liability for right to future investment (Note 8)
|
|
|
-
|
|
|
|
34
|
|
Convertible loan, net (Note 8)
|
|
|
3,204
|
|
|
|
289
|
|
Loans from controlling stockholder (Note 9)
|
|
|
-
|
|
|
|
117
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
3,693
|
|
|
|
817
|
|
|
|
|
|
|
|
|
|
|
LICENSE PURCHASE OBLIGATION, NET (Note 6)
|
|
|
-
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES (Note 11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT (Note 12):
|
|
|
|
|
|
|
|
|
Preferred Stock, with $0.001 par value per share -
|
|
|
|
|
|
|
|
|
Authorized: 1,000,000 shares at December 31, 2017 and 2016; Issued and outstanding: 0 shares at December 31, 2017 and 2016
|
|
|
-
|
|
|
|
-
|
|
Common Stock, with $0.001 par value per share -
|
|
|
|
|
|
|
|
|
500,000,000 and 100,000,000 shares authorized at December 31, 2017 and 2016, respectively; 4,350,608 and 3,023,043 shares issued and outstanding at December 31, 2017 and 2016, respectively
|
|
|
4
|
|
|
|
3
|
|
Additional paid- in capital
|
|
|
23,397
|
|
|
|
23,391
|
|
Treasury shares
|
|
|
-
|
|
|
|
(747
|
)
|
Accumulated other comprehensive income (loss)
|
|
|
(47
|
)
|
|
|
5
|
|
Accumulated deficit
|
|
|
(26,452
|
)
|
|
|
(23,483
|
)
|
|
|
|
|
|
|
|
|
|
Total
stockholders’ deficit
|
|
|
(3,098
|
)
|
|
|
(831
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
595
|
|
|
$
|
69
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
U.S.
dollars in thousands (except share and per share data)
|
For the December 31,
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
Research and development expenses
|
$
|
450
|
|
|
$
|
240
|
|
General and administrative expenses (Note 13a)
|
|
1,031
|
|
|
|
794
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
1,481
|
|
|
|
1,034
|
|
|
|
|
|
|
|
|
|
Financial expense, net (Note 13b)
|
|
1,485
|
|
|
|
105
|
|
|
|
|
|
|
|
|
|
Net loss
|
$
|
2,966
|
|
|
$
|
1,139
|
|
|
|
|
|
|
|
|
|
Addition to net loss
|
|
|
|
|
|
|
|
Deemed dividend with respect to repurchase the right for future investment
|
|
3
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Net loss applicable to Common stockholders
|
$
|
2,969
|
|
|
$
|
1,139
|
|
|
|
|
|
|
|
|
|
Other comprehensive (income) loss:
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
78
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Changes in unrealized gains on marketable equity securities
|
|
(26
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
Other comprehensive (income) loss
|
|
52
|
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
$
|
3,021
|
|
|
$
|
1,136
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
$
|
0.86
|
|
|
$
|
0.38
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock used in computing basic and diluted net loss per share
|
|
3,438,842
|
|
|
|
3,022,906
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
U.S.
dollars in thousands (except share data)
|
|
common stock
|
|
|
Additional paid-in
|
|
|
Treasury
|
|
|
Accumulated other comprehensive
|
|
|
Accumulated
|
|
|
Total stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
shares
|
|
|
income (loss)
|
|
|
deficit
|
|
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2016
|
|
|
3,023,043
|
|
|
$
|
3
|
|
|
$
|
23,080
|
|
|
$
|
(747
|
)
|
|
$
|
2
|
|
|
$
|
(22,344
|
)
|
|
$
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature in respect to convertible loan (Note 8a)
|
|
|
-
|
|
|
|
-
|
|
|
|
246
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
246
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
65
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
65
|
|
Other comprehensive income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
3
|
|
|
|
-
|
|
|
|
3
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,139
|
)
|
|
|
(1,139
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2016
|
|
|
3,023,043
|
|
|
|
3
|
|
|
|
23,391
|
|
|
|
(747
|
)
|
|
|
5
|
|
|
|
(23,483
|
)
|
|
|
(831
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature in respect to convertible loan (Note 8b)
|
|
|
-
|
|
|
|
-
|
|
|
|
811
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
811
|
|
Classification of derivative liability for right to future investment into equity (Note 8)
|
|
|
-
|
|
|
|
-
|
|
|
|
280
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
280
|
|
Issuance of units consisting of common stock and detachable warrants, net of issuance costs (Note 12c)
|
|
|
860,987
|
|
|
|
1
|
|
|
|
965
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
966
|
|
Exercise of options into common stock
|
|
|
31,439
|
|
|
|
*) -
|
|
|
|
21
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21
|
|
Cancellation of treasury shares with respect to reverse recapitalization
|
|
|
-
|
|
|
|
-
|
|
|
|
(747
|
)
|
|
|
747
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares issued with respect to reverse recapitalization (Notes 1d and 12e)
|
|
|
435,139
|
|
|
|
*) -
|
|
|
|
298
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
298
|
|
Amount that was allocated to
the repurchase of beneficial conversion feature in convertible loans (Note 8d)
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,800
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,800
|
)
|
Amount that was allocated to
the right for future investment - loan 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
44
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44
|
|
Amount that was allocated to the right for future investment-
loan 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
1,115
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,115
|
|
Deemed dividend with respect to the repurchase
of right for future investment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(78
|
)
|
|
|
-
|
|
|
|
(78
|
)
|
Changes in unrealized gains on marketable equity securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26
|
|
|
|
|
|
|
|
26
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,966
|
)
|
|
|
(2,966
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017
|
|
|
4,350,608
|
|
|
$
|
4
|
|
|
$
|
23,397
|
|
|
$
|
-
|
|
|
$
|
(47
|
)
|
|
$
|
(26,452
|
)
|
|
$
|
(3,098
|
)
|
|
*)
|
Representing
amount less than $1
|
The
accompanying notes are an integral part of the consolidated financial statements.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
U.S.
dollars in thousands
|
|
For the Year ended
December 31,
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,966
|
)
|
|
$
|
(1,139
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1
|
|
|
|
1
|
|
Stock-based compensation
|
|
|
19
|
|
|
|
65
|
|
Amortization of discounts and issuance costs related to convertible loans
|
|
|
1,122
|
|
|
|
122
|
|
Accrued interest on convertible loans (Note 8)
|
|
|
47
|
|
|
|
16
|
|
Loss from extinguishment of convertible loans (Note 8)
|
|
|
61
|
|
|
|
-
|
|
Change in the fair value of derivative liability for right to future investment (Note 8)
|
|
|
253
|
|
|
|
(76
|
)
|
Change in the fair value of license purchase obligation (Note 6)
|
|
|
3
|
|
|
|
38
|
|
Change in:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
(33
|
)
|
|
|
2
|
|
Trade payables
|
|
|
30
|
|
|
|
(6
|
)
|
Other accounts payable
|
|
|
(40
|
)
|
|
|
103
|
|
License purchase obligation
|
|
|
146
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(1,357
|
)
|
|
|
(874
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from loans from controlling stockholder
|
|
|
82
|
|
|
|
117
|
|
Proceeds from issuance of convertible loans, net of issuance costs (Note 8)
|
|
|
625
|
|
|
|
508
|
|
Proceeds from issuance of units consisting of common stock and warrants (Note 12c)
|
|
|
966
|
|
|
|
-
|
|
Proceeds from exercise of options into common stock
|
|
|
21
|
|
|
|
-
|
|
Repayment of license purchase obligation
|
|
|
(156
|
)
|
|
|
(152
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
1,538
|
|
|
|
473
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate change on cash and cash equivalents
|
|
|
10
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
187
|
|
|
|
(395
|
)
|
Cash and cash equivalents at the beginning of the year
|
|
|
28
|
|
|
|
423
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the year
|
|
$
|
215
|
|
|
$
|
28
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash financing activities:
|
|
|
|
|
|
|
|
|
Classification of derivative liability for right to future investment into equity (Note 2m)
|
|
$
|
280
|
|
|
$
|
-
|
|
Acquisition of marketable equity securities as part of the recapitalization (Note 1d)
|
|
$
|
298
|
|
|
$
|
-
|
|
The
accompanying notes are an integral part of the consolidated financial statements.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
a.
|
Wize
Pharma Inc. (Formerly: Ophthalix Inc.) (the “Company” or “Wize”)
was originally incorporated in the State of Nevada on December 10, 1999 under the name
Bridge Capital.com Inc., and was a nominally capitalized corporation that did not commence
its operations until it changed its name to Denali Concrete Management Inc. (“Denali”),
in March 2001. Denali was a concrete placement company specializing in providing concrete
improvements in the road construction industry. Denali operated primarily in Anchorage,
Alaska, placing curb and gutter, sidewalks and retaining walls for state, municipal and
military projects. On June 27, 2011, Denali changed its name to OphthaliX, Inc. (“OphthaliX”)
and also changed its corporate domicile from Nevada to Delaware.
|
In December
2005, the Company ceased its principal business operations and focused its efforts on seeking a business opportunity, becoming
a public shell company in the U.S.
In September
2016, the Company’s Board of Directors and the Company’s then parent and majority stockholder (“Can-Fite”),
consented in writing to, among other things, the voluntary dissolution and liquidation of the Company pursuant to a Plan of Dissolution.
In November
2016, the Company’s Board of Directors abandoned the voluntary dissolution and liquidation of the Company. Subsequently,
on November 15, 2016, the Company entered into a non-binding letter of intent with Wize Pharma Ltd., an Israeli company (“Wize
Israel”), for the acquisition of Wize Israel by way of a reverse triangular merger.
Wize
Israel was incorporated in Israel in 1982 as a public company by the name of “Eitam Eretz Israel Advanced Industries Ltd.,”
which name was changed to Wize Pharma Ltd. in June 2015. In September 1987, Wize Israel’s shares were listed for trade on
the Tel Aviv Stock Exchange (the “TASE”).
Wize
Israel is a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including dry
eye syndrome (“DES”). In May 2015, Wize Israel entered into an Exclusive Distribution and Licensing Agreement (as amended,
the “License Agreement”) with Resdevco Ltd. (“Resdevco”), whereby Resdevco granted to Wize Israel an exclusive
license to purchase, market, sell and distribute a formula known as LO2A (“LO2A” or the “Product”) in the
United States, Israel, Ukraine and China as well as a contingent right to do the same in other countries. LO2A is a drug developed
for the treatment of DES, and other ophthalmological illnesses, including Conjunctivochalasis (“CCH”) and Sjögren’s
syndrome (“Sjögren’s”).
Following
the Merger transaction as described in Note 1d, the business of Wize Israel became the ongoing business of the Company and the
Company is defined as a “smaller reporting company”, according to Item 10(f)(1) of Regulation S-K, as promulgated by
the United States Securities and Exchange Commission (the “SEC”).
Commencing
August 30, 2016, Wize Israel manages most of its activity through a wholly-owned Israeli Subsidiary (“OcuWize Ltd.”),
which manages and develops most of the activity under the License Agreement (see also Note 5).
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
b.
|
Going
concern uncertainty and management plans:
|
As
described in Note 5, Wize Israel purchased an exclusive license to purchase, market, sell and distribute LO2A in the United States,
Israel, Ukraine and China as well as a contingent right to do the same in other countries. The registration process in certain
countries, including the United States, and the commercialization of Wize Israel’s products is expected to require substantial
expenditures.
The
Company has not yet generated any revenues from its current operations, and therefore is dependent upon external sources for financing
its operations. As of December 31, 2017, the Company has an accumulated deficit and a stockholders’ deficit.
In
addition, in each of the years ended December 31, 2017 and 2016, the Company reported losses and negative cash flows from operating
activities. Management considered the significance of such conditions in relation to the Company’s ability to meet
its current and future obligations and determined that such conditions raise substantial doubt about the Company’s ability
to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments to
reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities
that may result from the possible inability of the Company to continue as a going concern.
Until
such time as the Company generates sufficient revenue to fund its operations (if ever), the Company plans to finance its operations
through the sale of equity or equity-linked securities and/or debt securities and, to the extent available, short-term and long-term
loans. There can be no assurance that the Company will succeed in obtaining the necessary financing to continue its operations
as a going concern.
As discussed
in Note 8b, in 2017, Wize Israel entered into the 2017 Loan Agreement with 2017 Lenders pursuant to which the gross amount of $822
(“2017 Loan”) has been raised. The 2017 Loan was provided for a period ending December 31, 2018 and bears 4% annual interest.
The number of shares that will be issued upon conversion of the 2017 Loan is determined in the 2017 Loan Agreement, pursuant to
which the 2017 Lenders, have a detachable right until June 30, 2019, to invest up to $411,072, in the aggregate, at an agreed price
per share (as adjusted based on the Exchange Ratio and the 2017 Loan Amendment as described below) of $1.332.
As discussed
in Note 12c, on June 23, 2017, Wize Israel entered into the 2017 PIPE Agreement with certain investors, pursuant to which, the
2017 PIPE Investors invested a total of up to NIS 3,490,000 (approximately $966) in exchange for a total of 860,987 ordinary shares,
at a price per share of NIS 4.05 (approximately $1.15 according to an exchange rate as of June 23, 2017). Subject to the Closing
Date of the Merger (see also Note 11c), Wize Israel also undertook to cause the Company to grant warrants to each of the 2017 PIPE
Investors (the “Warrants”), with each Warrant being exercisable into one share of Common Stock, with a term of three
years from the date of grant.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
According
to the 2017 PIPE Agreements, the number of Warrants and the exercise price thereof will reflect, prior to giving effect to an adjustment
based on the Exchange Ratio, (i) 30,625 warrants to Peretz and (ii) 62,500 warrants to each of the Other Investors, each warrant
exercisable into one ordinary share of Wize Israel, at an exercise price of NIS 28.8 per share (approximately $8.40 according to
the exchange rate as of December 31, 2017). According to the Exchange Ratio, Peretz was granted 126,928 Warrants exercisable into
Common Stock and each of the Other Investors was granted 259,037 Warrants exercisable into Common Stock.
Direct
and incremental issuance costs amounted to approximately NIS 45,000 (approximately $13 according to an exchange rate as of June
23, 2017).
As
discussed in Note 1d, a Merger between the Company and Wize Israel became effective on November 16, 2017, and following such Merger,
Wize Israel activities are the sole activities of the Company.
As
of December 31, 2017, the Company had an accumulated deficit of $26,452. The Company has historically incurred net losses and
is not able to determine whether or when it will become profitable, if ever. To date, the Company has not commercialized any products
or generated any revenues from product sales and accordingly it does not have a revenue stream to support its cost structure.
The Company’s losses have resulted principally from costs incurred in development and discovery activities.
The
Company expects to continue to incur losses for the foreseeable future, and these losses will likely increase as it:
|
●
|
initiates
and manages pre-clinical development and clinical trials for LO2A;
|
|
●
|
seeks
regulatory approvals for LO2A;
|
|
●
|
implements
internal systems and infrastructures;
|
|
●
|
seeks
to license additional technologies to develop;
|
|
●
|
pays
royalties related to the License Agreement;
|
|
●
|
hires
management and other personnel; and
|
|
●
|
moves
towards commercialization.
|
No
certainty exists that the Company will be able to complete the development of LO2A for CCH, Sjögren’s or any other ophthalmic
disorder, due to financial, technological or other difficulties. If LO2A fails in clinical trials or does not gain regulatory
clearance or approval, or if LO2A does not achieve market acceptance, the Company may never become profitable. Even if the Company
does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. The Company’s
inability to achieve and then maintain profitability would negatively affect its business, financial condition, results of operations
and cash flows. Moreover, the Company’s prospects must be considered in light of the risks and uncertainties encountered
by an early-stage company and in highly regulated and competitive markets, such as the biopharmaceutical market, where regulatory
approval and market acceptance of its products are uncertain. There can be no assurance that the Company’s efforts will
ultimately be successful or result in revenues or profits.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
On May
21, 2017, the Company and a wholly-owned private Israeli subsidiary of the Company, Bufiduck Ltd. (“Merger Sub”), and
Wize Israel, entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other
things, Merger Sub merged with and into Wize Israel, with Wize Israel becoming a wholly-owned subsidiary of the Company and the
surviving corporation of the merger (the “Merger”). On November 16, 2017, the Merger was closed (the “Closing
Date”).
Upon the
Closing Date of the Merger, each issued and outstanding ordinary share of Wize Israel was automatically converted into 4.1445791236989
shares of the Company’s common stock (the “Exchange Ratio”) (such number not being converted as per the Reverse Stock
Split described in Note 12b). As a result, an aggregate of 3,915,469 shares, or 90% of the issued and outstanding common stock
of the Company were issued to Wize Israel’s shareholders. The pre-Merger stockholders of the Company retained an aggregate of 435,052
shares, or 10% of the issued and outstanding common stock of the Company.
Immediately
following the Closing Date of the Merger, Ron Mayron, Yossi Keret, Dr. Franck Amouyal and Joseph Zarzewsky were appointed to the
Company’s Board of Directors to hold office until the earlier of the next annual meeting where directors will be appointed, such
director’s successor is elected and qualified, or until such director’s earlier resignation or removal, and following
those appointments, Pnina Fishman, Ph.D. Ilan Cohen, Ph.D., Guy Regev and Roger Kornberg, Ph.D. resigned from the board of directors
of the Company. Accordingly, the Company’s Board of Directors consists of five members, Ron Mayron, Yossi Keret, Dr. Franck Amouyal,
Joseph Zarzewsky and Michael Belkin, Ph.D.
Immediately
following the Closing Date of the Merger, Pnina Fishman, Ph.D., Itay Weinstein and Ronen Kantor resigned as officers of the Company
and the newly constituted board appointed Or Eisenberg as Acting Chief Executive Officer, Chief Financial Officer, Treasurer and
Secretary and Noam Danenberg as Chief Operating Officer.
Wize Israel’s
ordinary shares were delisted from the TASE and there will no longer be a public trading market for Wize Israel’s ordinary shares
in Israel. The Company’s common stock began trading on the OTC Pink under the symbol “OPLI” on January 25, 2012
through November 15, 2017, and under the symbol “WIZP” from November 16, 2017 through January 3, 2018. Since January
4, 2018, the Company’s common stock has been traded on the OTCQB under the symbol “WIZP.”
Following
the Reverse Stock Split, a “D” was placed on the Company’s ticker symbol (WIZPD) for 20 business days from March
5, 2018, the effective date of the Reverse Stock Split. After 20 business days, the symbol will then change back to “WIZP”.
As contemplated
in the Merger Agreement, the Company’s annual meeting of its stockholders amended its Certificate of Incorporation, whereby, (i)
the total number of shares of stock which the Company shall have authority to issue is 500,000,000 shares of Common Stock, and 1,000,000 shares of preferred stock, par value $0.001 per share; (ii) the name of the Company
was changed from “OphthaliX, Inc.” to “Wize Pharma, Inc.” and (iii) re-election of the Company’s
incumbent directors.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
The
Merger was accounted for as a reverse recapitalization which is outside the scope ASC 805, “Business Combinations” (“ASC
805”), as the Company, the legal acquirer, is considered a non-operating public shell, and is therefore not a business as
defined in ASC 805. Under reverse capitalization accounting, Wize Israel will be considered the acquirer for accounting and
financial reporting purposes. The Merger will be accounted for in a manner that is substantially the same as a reverse acquisition
under ASC 805, except that any excess fair value of the consideration transferred over the net fair value of the monetary assets
of the Company will be recognized as a reduction of equity.
The
annual consolidated financial statements of Wize Israel reflect the operations of the acquirer for accounting purposes together
with a deemed issuance of shares, equivalent to the shares held by the former stockholders of the legal acquirer and a recapitalization
at the equity of the accounting acquirer. The annual consolidated financial statements include the accounts of the Company since
the Closing Date of the reverse capitalization and the accounts of Wize Israel since its inception.
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES
|
The
consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United
States (“U.S. GAAP”).
|
a.
|
Use
of estimate in preparation of financial statements:
|
The
preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments
and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The Company
evaluates on an ongoing basis its assumptions. The Company’s management believes that the estimates, judgments and assumptions
used are reasonable based upon information available at the time they are made. These estimates, judgments and assumptions can
affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the
consolidated financial statements, and the reported amounts of expenses during the reporting periods. Actual results could differ
from those estimates.
As
applicable to the consolidated financial statements, the most significant estimates and assumptions relate to the going concern
assumptions and determining the fair value of embedded and freestanding financial instruments related to convertible loans.
|
b.
|
Principles
of consolidation:
|
The
consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. Inter-company balances
and transactions have been eliminated upon consolidation.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
As
Wize Israel activities were conducted in Israel and most of its financing was denominated and determined in New
Israel Shekels (NIS), management has determined that the functional currency of Wize Israel was NIS. Following to the Closing
Date of the Merger, the Company aims to direct its main operations in the United States market. In addition, following to
the Closing Date of the Merger, the current convertible loans which were previously denominated in NIS, were changed into
U.S. dollars terms, including their principal and conversion price. Similarly, the Company issued warrants eligible for
exercise for the Company’s shares of common stock at an exercise price denominated in U.S. dollars. Also, the
management believes the Company will raise funds through private investment rounds and / or from issuance of equity in dollar
amounts by approaching the market in the United States. As a result, it was determined that the U.S dollar is the currency of
the primary economic environment in which the Company operates and expects to continue to operate in the foreseeable
future. Thus, as of that date, the functional currency of the Company is the U.S. dollar.
The
reporting currency of the consolidated financial statements is U.S. dollars. Pre-merger, Wize Israel and OcuWize results were
translated into U.S. dollars in accordance with the standards of the Financial Accounting Standards Board (“FASB”). Accordingly,
assets and liabilities were translated from NIS to U.S. dollars using year-end exchange rates, and income and expense items were
translated at average exchange rates during the year. Gains or losses resulting from translation adjustments (which result from
translating an entity’s financial statements into U.S. dollars if its functional currency is different than the U.S. dollar)
are reported in other comprehensive income and are reflected in equity, under “accumulated other comprehensive income (loss)”.
Balances
denominated in, or linked to foreign currency are stated on the basis of the exchange rates prevailing at the balance sheet date. For
foreign currency transactions included in the consolidated statement of comprehensive loss, the exchange rates applicable on the
relevant transaction dates are used. Transaction gains or losses arising from changes in the exchange rates used in
the translation of such balances are carried to financing income or expenses as applicable.
The
following table presents data regarding the dollar exchange rate of relevant currencies:
|
|
|
As of December 31,
|
|
|
% of change
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
USD 1 = NIS
|
|
|
3.467
|
|
|
|
3.845
|
|
|
|
(9.8
|
)
|
|
|
(1.5
|
)
|
Cash
equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months
or less at acquisition.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
e.
|
Restricted
bank deposit:
|
Restricted
bank deposit is a deposit with maturities of more than three months and up to one year. The restricted bank deposit is presented
at its cost, including accrued interest and represents cash which is used as collateral for Wize Israel’s credit card.
|
f.
|
Marketable
equity securities:
|
The Company’s
investment in marketable equity securities is classified as available-for-sale carried at fair value based on the quoted market
price on the TASE, with unrealized gains and losses reported as a separate component of stockholders’ deficit under accumulated
other comprehensive income in the consolidated balance sheets. Realized gains and losses on sales of available-for-sale securities
are included as financials income, net in the consolidated statements of comprehensive loss.
The Company
accounted for these marketable equity securities as available-for-sale carried at fair value since these marketable equity securities
are available to be converted into cash to fund Company’s current operations.
The Company
recognizes an impairment charge when a decline in the fair value of its investments in securities is below the cost basis of such
securities and is judged to be other than temporary. Factors considered in making such a determination include the duration and
severity of the impairment, the reason for the decline in value, the potential recovery period and the Company’s intent to sell,
including whether it is more likely than not that the Company will be required to sell the investment before recovery of cost basis.
For securities
that are deemed other-than-temporarily impaired, an entity should recognize the difference between the cost basis of the impaired
equity security and the fair value on the measurement date, as an other-than-temporarily impairment loss as part of financial income,
net in the statement of comprehensive loss. The fair value on measurement date should be considered the equity security’s
new cost basis. Unrealized gains and losses previously recorded through other comprehensive income, including the tax effects,
should also be reversed.
The new cost
basis should not be changed for subsequent increases in fair value.
After an
impairment loss is recognized for individual equity securities classified as available for sale, future increases or decreases
in fair value (presuming no additional other-than-temporarily impairments exist) are included in other comprehensive income.
As
of December 2017, the Company has not recorded loss from impairment.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
g.
|
Property
and equipment, net:
|
Property
and equipment are stated at cost, net of accumulated depreciation. Depreciation is calculated using the straight-line method over
the estimated useful lives of the assets at the following rates:
|
|
|
%
|
|
|
|
|
|
|
|
Computers and electronic equipment
|
|
|
33
|
|
|
Furniture and office equipment
|
|
|
10
|
|
|
h.
|
Impairment
of long-lived assets:
|
The
Company’s long-lived assets are reviewed for impairment in accordance with ASC Topic 360 “Property, plant and equipment”,
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability
of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows
expected to be generated by the assets. If such asset is considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount of the asset exceeds its fair value. Assets to be disposed of are reported at the lower
of the carrying amount or fair value less costs to sell. During the years ended December 31, 2017 and 2016, no impairment losses
have been identified.
|
i.
|
Research
and development expenses:
|
Research
and development expenses are charged to the statement of comprehensive loss as incurred.
In-Process
Research and Development assets (“IPR&D”), acquired in an asset acquisition (i.e. assets acquired outside a business
combination transactions) that are to be used in a research and development project which are determined not to have an alternative
future use are charged to expense at the acquisition date in accordance with ASC 730, “Research and Development”.
Wize Israel has one employee
as of December 31, 2017.
Wize Israel’s
liability for severance pay is pursuant to Section 14 of the Severance Compensation Act, 1963 (“Section
14”), pursuant to which all Wize Israel’s employees are included under Section 14, and are entitled only to
monthly deposits, at a rate of 8.33% of their monthly salary, made in the employee’s name with insurance companies.
Under Israeli employment law, payments in accordance with Section 14 release Wize Israel from any future severance payments
in respect of those employees. Wize Israel has made all of the required payments as of December 31, 2017. The fund is made
available to the employee at the time the employer-employee relationship is terminated, regardless of cause of termination.
The severance pay liabilities and deposits under Section 14 are not reflected in the consolidated balance sheets as the
severance pay risks have been irrevocably transferred to the severance funds.
Severance
expenses for the years ended December 31, 2017 and 2016 amounted to $10 and $8, respectively.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
The
Company accounts for income taxes in accordance with ASC 740, “Income Taxes”. This topic prescribes the use of the liability
method whereby deferred tax assets and liability account balances are determined based on differences between financial reporting
and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. Valuation allowances in respect of deferred tax assets are provided for, if necessary, to
reduce deferred tax assets to amounts more likely than not to be realized.
The
Company implements a two-step approach to recognize and measure uncertain tax positions. The first step is to evaluate the tax
position taken or expected to be taken in a tax return by determining if the weight of available evidence indicates that it is
more likely than not that, on an evaluation of the technical merits, the tax position will be sustained on audit, including resolution
of any related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount that is more
than 50% (cumulative basis) likely to be realized upon ultimate settlement. As of December 31, 2017 and 2016, no liability for
unrecognized tax positions has been recorded.
|
l.
|
Concentrations
of credit risk:
|
Financial
instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents
and restricted bank deposits. Cash and cash equivalents and restricted bank deposits are invested in major banks in Israel.
Management
believes that the financial institutions that hold the Company’s investments are financially sound and, accordingly, minimal credit
risk exists with respect to these investments.
The
Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign
hedging arrangements.
|
1.
|
Allocation
of proceeds:
|
The
proceeds received upon issuance of the 2016 Loan (see Note 8) together with a freestanding derivative
financial instrument (derivative liability for right to future investment) were allocated to the financial instruments issued
based on the residual value method. The detachable derivative financial instrument was recognized based on its fair value and
the remaining amount of the proceeds was allocated to the 2016 Loan component.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
2.
|
Beneficial
Conversion Features (“BCF”):
|
|
a.
|
The
Company has considered the provisions of ASC 815-40, “Derivatives and Hedging -
Contracts in Entity’s Own Equity”, and determined that the embedded conversion feature
of the 2016 Loan should not be separated from the host instrument because it qualifies
for equity classification. Furthermore, the Company applied ASC 470-20, “Debt -
Debt with Conversion and Other Options” which clarifies the accounting for instruments
with BCF or contingently adjustable conversion ratios, and has applied the BCF guidance
to determine whether the conversion feature is beneficial to the investor.
|
The
BCF has been calculated by allocating the proceeds received in financing transactions to the 2016 Loan and to any detachable freestanding
financial instrument (derivative liability for future investment (see also Note 8)) included in the transaction, and by measuring
the intrinsic value of the conversion option based on the effective conversion price as a result of the allocated proceeds.
The
intrinsic value of the conversion option with respect to the 2016 Loan was recorded as a discount on the 2016 Loan with a corresponding
amount credited directly to equity as additional paid-in capital. After the initial recognition, the discount on the 2016 Loan
is amortized as interest expense over the contractual term of the 2016 Loan by using the effective interest method.
|
b.
|
The
Company has considered the provisions of ASC 815-15, “Derivatives and Hedging
- Embedded Derivatives” (“ASC 815-15”), and determined that the embedded
conversion feature of the 2017 Loan cannot be considered as clearly and closely related
to the host debt instrument, However, it was determined that the embedded conversion
feature should not be separated from the host instrument because the embedded conversion
option, if freestanding, does not meet the definition of a derivative in accordance with
the provisions of ASC 815-10, since its terms do not require or permit net settlement.
Thus, it was determined that the conversion feature does not meet the characteristic
of being readily convertible to cash.
|
The
Company applied ASC 470-20 which clarifies the accounting for instruments with BCF or contingently adjustable conversion ratios.
Pursuant
to ASC 470-20-30, the amount of the BCF with respect to the 2017 Loan was calculated at the commitment date, as the
difference between the conversion price (i.e. the entire proceeds received for the 2017 Loan) and the aggregate fair value of
the common stock and other securities (which consist of the Investment Option) into which the 2017 Loan is
convertible.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
As
such difference was determined to be greater than the amount of the entire proceeds originally received for the 2017 Loan, the
amount of the discount assigned to the BCF was limited to the amount of the entire proceeds.
If
a convertible instrument contains conversion terms that are adjusted upon the occurrence of a future event, or as a result of
anti-dilution adjustment provisions, any changes to the conversion terms might result in the recognition of an additional BCF.
|
3.
|
Modifications
or exchanges:
|
Modifications
to, or exchanges of, financial instruments such as convertible loans, are accounted for as a modification or an extinguishment,
following to provisions of ASC 470-50, “Debt- Modification and Extinguishments”. Such an assessment is done by management
either qualitatively or quantitatively based on the facts and circumstances of each transaction.
Under
ASC 470-50, modifications or exchanges are generally considered extinguishments with gains or losses recognized in current earnings
if the terms of the new debt and original instrument are substantially different. The instruments are considered “substantially
different” when the present value of the cash flows under the terms of the new debt instrument is at least 10% different
from the present value of the remaining cash flows under the terms of the original instrument. If the terms of a debt instrument
are changed or modified and the present value of the cash flows under the terms of the new debt instrument is less than 10%, the
debt instruments are not considered to be substantially different, except in the following two circumstances (i) The
transaction significantly affects the terms of an embedded conversion option, such that the change in the fair value of the embedded
conversion option (calculated as the difference between the fair value of the embedded conversion option immediately before and
after the modification or exchange) is at least 10% of the carrying amount of the original debt instrument immediately before
the modification or exchange or (ii) The transaction adds a substantive conversion option or eliminates a conversion
option that was substantive at the date of the modification or exchange.
If
the original and new debt instruments are considered as “substantially different”, the original debt is derecognized
and the new debt is initially recorded at fair value, with the difference recognized as an extinguishment gain or loss.
If
a convertible debt instrument with a beneficial conversion option that was separately accounted for in equity, is extinguished
prior to its conversion or stated maturity date, a portion of the reacquisition price is allocated to the repurchase of the beneficial
conversion option. The amount of the reacquisition price allocated to the beneficial conversion option is measured using the intrinsic
value of that conversion option at the extinguishment date. The residual amount, if any, is allocated to the convertible debt
instrument.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
The
gain or loss on the extinguishment of the convertible debt instrument is determined based on the difference between the carrying
amount and the allocated reacquisition price.
Modifications
to, or exchanges of equity financial instruments such as right to future investment, are accounted for as a modification or an
extinguishment in a similar manner as described above. Such an assessment is done by management either qualitatively or quantitatively
based on the facts and circumstances of each transaction. Among others, management considers whether, the fair value of the financial
instruments before and after the modification or exchange are substantially different.
If
the original and new equity instruments are considered as “substantially different”, the original instrument is derecognized
and the new instrument is initially recorded at fair value, with the difference recognized as a reduction of, or increase to,
retained earnings as a deemed dividend.
|
4.
|
Issuance
costs of convertible loan:
|
|
a.
|
Upon
initial recognition, costs incurred in respect of obtaining financing through issuance
of the 2016 Loan (or costs allocated to such component in a package issuance) are presented
as a direct deduction from the amount of the 2016 Loan and in subsequent periods such
costs (together with the discount created by the BCF) expensed as financing expenses
over the contractual term of the 2016 Loan by using the effective interest method. Any
such costs that were allocated to the derivative component were expensed as incurred.
|
|
b.
|
Upon
initial recognition, costs incurred in respect of obtaining financing through issuance
of the 2017 Loan also discussed in Note 8 (or costs allocated to such component in a
package issuance) were presented as a deferred asset since the 2017 loan was completely
discounted at the initial recognition. In subsequent periods, such expenses were amortized
ratably over the original term of the 2017 Loan.
|
|
n.
|
Fair
value of financial instruments:
|
ASC
820, “Fair Value Measurements and Disclosures” (“ASC 820”), defines fair value as the price that would be
received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between
market participants at the measurement date.
In
determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring
fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most
observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset
or liability developed based on market data obtained from sources independent of the Company.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
Unobservable
inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset
or liability developed based on the best information available in the circumstances.
The
hierarchy is broken down into three levels based on the inputs as follows:
|
Level 1
|
-
|
Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access.
|
|
Level 2
|
-
|
Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
|
|
Level 3
|
-
|
Valuations
based on inputs that are unobservable and significant to the overall fair value measurement.
|
The
availability of observable inputs can vary from investment to investment and is affected by a wide variety of factors, including,
for example, the type of investment, the liquidity of markets and other characteristics particular to the transaction. To the
extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of
fair value requires more judgment and the investments are categorized as Level 3.
The
carrying amounts of cash and cash equivalents, short-term bank deposits, other accounts receivable, trade payables and other accounts
payable approximate their fair value due to the short-term maturities of such instruments.
Fair
value of the marketable equity securities is determined based on a Level 1 input.
Derivative
financial instruments are measured at fair value, on a recurring basis. The fair value of derivatives generally reflects the estimated
amounts that the Company would receive or pay to terminate the contracts at the reporting dates, based on the prevailing currency
or stock prices, as applicable. The fair value measurement of the derivative liability for right to future investment and the
extinguishment of 2017 Loan and 2016 Loan are classified within Level 3.
Following
the modification described in Note 8a, based on the modified terms of the Right of Future Investment, Wize
Israel’s management engaged an external appraiser that measured the fair value of the Right of Future Investment
immediately prior to the Modification Date at NIS 1,042,000 (approximately $280 according to the exchange
rate as of the Modification Date) and reclassified such amount from a derivative liability to additional paid-in
capital.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
The
following tabular presentation reflects the components of the derivative liability associated with such rights during the years
ended December 31, 2016 and 2017:
|
|
|
Fair value
of Right of Future Investment
|
|
|
|
|
|
|
|
Balance at 2016 Loan Origination Date (Note 8a)
|
|
$
|
110
|
|
|
Change in the fair value of derivative liability
|
|
|
(76
|
)
|
|
|
|
|
|
|
|
Balance at December 31, 2016
|
|
$
|
34
|
|
|
Change in the fair value of derivative liability
|
|
|
246
|
|
|
Reclassification of derivative liability into equity
|
|
|
(280
|
)
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
$
|
-
|
|
|
o.
|
Legal
and other contingencies:
|
The
Company accounts for its contingent liabilities in accordance with ASC 450 “Contingencies”. A provision is recorded
when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. With respect
to legal matters, provisions are reviewed and adjusted to reflect the impact of negotiations, estimated settlements, legal rulings,
advice of legal counsel and other information and events pertaining to a particular matter. As of December 31, 2017, the
Company is not a party to any litigation that could have a material adverse effect on the Company’s business, financial position,
results of operations or cash flows.
Legal
costs incurred in connection with loss contingencies are expensed as incurred.
Shares
held by the Company are presented as a reduction of equity, at their cost to the Company as treasury stock, until such shares
are retired and removed from the account.
The
Company applies the provisions of ASC Topic 815, “Derivatives and Hedging” pursuant to which all the derivative financial
instruments are recognized as either financial assets or financial liabilities on the balance sheet at fair value. The accounting
for changes in the fair value of a derivative financial instrument depends on whether it has been designated and qualifies as
part of a hedging relationship and further, on the type of hedging relationship.
As
of December 31, 2016, the balance of derivative instruments consisted of derivative liability for right to future investment in
an amount of $34 (see also r. below and Note 8), and is stated at fair value.
During
the years ended December 31, 2017 and 2016, the Company did not designate any financial instruments for hedging purposes.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
r.
|
Derivative
liability for right to future investment:
|
The
Company reviewed the terms of such obligation and determined that it is not eligible to be classified as a component of permanent
equity, as such instrument permitted the holder to receive a variable number of shares of common stock upon exercise, by investment
of cash amount that will be determined at the discretion of the holder (up to a pre-determined cap). Accordingly, such financial
instrument was accounted for as a derivative liability and as such was measured upon initial recognition and re-measured at subsequent
reporting periods at fair value. Changes in the fair value were recorded in the consolidated statement of comprehensive loss within
the caption “financial expense, net”.
The
terms of aforesaid right to future investment have been modified and as a result the derivative liability for right to future
investment was reclassified into additional paid-in capital (see also Note 8c).
|
s.
|
Basic
and diluted loss per share:
|
Basic
loss per share is computed by dividing the loss for the period applicable to Ordinary Shareholders by the weighted average number
of shares of common stock outstanding during the period.
In
computing diluted loss per share, basic loss per share is adjusted to reflect the potential dilution that could occur upon the
exercise of options or warrants issued or granted using the “treasury stock method” and upon the conversion of 2017
Loan and 2016 Loan using the “if-converted method”, if the effect of each of such financial instruments is dilutive.
For
the years ended December 31, 2017 and 2016, all outstanding stock options and other convertible instruments have been excluded
from the calculation of the diluted net loss per share as all such securities are anti-dilutive for all years presented.
As
described in Note 12b, for accounting purposes, the loss per share amounts have been adjusted to give retroactive effect to
the Exchange Ratio and the Reverse Stock Split for all periods presented in these consolidated financial
statements.
The loss
and the weighted average number of shares used in computing basic and diluted net loss per share for the years ended December 31,
2017 and 2016, is as follows:
|
|
|
Year ended December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
2,966
|
|
|
$
|
1,139
|
|
|
Deemed dividend with respect to right for future investment
|
|
$
|
3
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss available to stockholders of Common Stock
|
|
$
|
2,969
|
|
|
$
|
1,139
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
Shares of common stock used in computing basic and diluted net loss per share
|
|
|
3,438,842
|
|
|
|
3,022,906
|
|
|
Net loss per share of Ordinary Share, basic and diluted
|
|
$
|
0.87
|
|
|
$
|
0.38
|
|
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
t.
|
Accumulated
other comprehensive income (loss):
|
Accumulated
other comprehensive income (loss), presented in stockholders’ deficit, includes (i) gains and losses that were incurred from the
translation of the pre-merger results of Wize Israel and OcuWize to the reporting currency (see also Note 2c) and (ii) unrealized
gain from the change in the fair value of marketable equity securities that are classified as available-for-sale.
The
components of accumulated other comprehensive income (loss) as of December 31, 2016 and 2017 were as follows:
|
|
|
Total accumulated other comprehensive income
(loss)
|
|
|
|
|
|
|
|
Balance at December 31, 2016 (*)
|
|
$
|
5
|
|
|
Foreign currency translation adjustment
|
|
|
(78
|
)
|
|
Unrealized gain on marketable securities
|
|
|
26
|
|
|
|
|
|
|
|
|
Balance at December 31, 2017
|
|
$
|
(47
|
)
|
(*)
consist solely of the foreign currency translation adjustment
|
u.
|
Stock-based
compensation:
|
Stock-based
compensation to employees is accounted for in accordance with ASC 718, “Compensation - Stock Compensation”
(“ASC 718”), which requires estimation of the fair value of equity - based payment awards on the date of grant
using an option pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an
expense over the requisite service period.
Stock-based
compensation expense is recognized for the value of awards granted based on the accelerated method over the requisite service
period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant
and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
The
fair value of stock options granted to Wize Israel employees was estimated using the binominal model, which requires a number
of assumptions, of which the most significant are the expected stock price volatility and the expected option term. Expected volatility
was calculated based upon historical volatilities of Wize Israel on a weekly basis since the marketability of Wize Israel is less
than the expected option term. The expected option term represents the period that Wize Israel’s stock options are expected to
be outstanding and is determined based on the simplified method until sufficient historical exercise data will support using expected
life assumptions. The risk-free interest rate is based on the yield from U.S. treasury bonds with an equivalent term. The expected
dividend yield assumption is based on Wize Israel’s historical experience and expectation of no future dividend payouts. Wize
Israel has historically not paid cash dividends and has no foreseeable plans to pay cash dividends in the future.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
The
fair value for options granted in 2016 to employees and directors of Wize Israel was estimated at the date of grant using a binominal
model with the following weighted average assumptions:
|
|
|
2016
|
|
|
|
|
|
|
|
Dividend yield
|
|
|
0%
|
|
|
Expected volatility
|
|
|
86.16%
|
|
|
Risk-free interest rates
|
|
|
0.43%-1.03%
|
|
|
Expected life (years)
|
|
|
2.00-4.00
|
|
ASC
505-50, “Equity-Based Payments to Non-Employees” (“ASC 505”) provisions are applied with respect to options
and warrants issued to non-employees which requires the use of option valuation models to measure the fair value of the options
and warrants at the grant date, and at the end of each accounting period between the grant date and the final measurement date.
Upon
the Closing Date of the Merger (see also Note 1d), all the outstanding options under 2015 Plan of Wize Israel were cancelled (see
also Note 12f).
|
v.
|
Disclosure
of new Standards in the period
|
On
March 30, 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation”, which effects all entities that issue
share-based payment awards to their employees. The amendments in this ASU cover such areas as the recognition of excess tax benefits
and deficiencies, the classification of those excess tax benefits on the statement of cash flows, an accounting policy election
for forfeitures, the amount an employer can withhold to cover income taxes and still qualify for equity classification and the
classification of those taxes paid on the statement of cash flows. This ASU was effective for annual and interim periods beginning
after December 15, 2016. This guidance can be applied either prospectively, retrospectively or using a modified retrospective
transition method. The Company decided to adopt the new guidance prospectively. This new guidance does not have a material impact
on the Company’s consolidated financial statements.
|
w.
|
Recent
Accounting Pronouncements not adopted yet
|
|
1.
|
In
November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): “Restricted
Cash”, which requires companies to include amounts generally described as restricted
cash and restricted cash equivalents in cash and cash equivalents when reconciling beginning-of-period
and end-of-period total amounts shown on the statement of cash flows. The amendments
in this Update are effective for public business entities for fiscal years beginning
after December 15, 2017, and interim periods within those fiscal years. Early adoption
is permitted, including adoption in an interim period. This new guidance is not expected
to have a material impact on the Company’s consolidated financial statements.
|
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE
2:-
|
SIGNIFICANT
ACCOUNTING POLICIES (Cont.)
|
|
2.
|
In
January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805): “Clarifying
the Definition of a Business”, which provides amendments to clarify the definition
of a business and affect all companies and other reporting organizations that must determine
whether they have acquired or sold a business. The amendments are intended to help companies
and other organizations evaluate whether transactions should be accounted for as acquisitions
(or disposals) of assets or businesses. The guidance is effective for public business
entities for fiscal years beginning after December 15, 2017, and interim periods within
those fiscal years and should be applied prospectively as of the beginning of the period
of adoption. Early adoption is permitted under certain circumstances. The Company adopted
ASU 2017-01 on January 1, 2018 and it did not have an impact on its accounting and disclosures.
|
|
3.
|
In
May 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting” guidance
on changes to terms and conditions of share-based payment awards. The amendment provides
guidance about which changes to terms or conditions of a share-based payment award require
an entity to apply modification accounting. The guidance will be effective for the fiscal
year beginning on January 1, 2018, including interim periods within that year (early
adoption is permitted). The Company is currently evaluating the potential effect of the
guidance on its consolidated financial statements.
|
|
4.
|
In
July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260); Distinguishing
Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815)”, which
allows companies to exclude a down round feature when determining whether a financial
instrument is considered indexed to the entity’s own stock. As a result, financial
instruments with down round features may no longer be required to be accounted classified
as liabilities. A company will recognize the value of a down round feature only when
it is triggered and the strike price has been adjusted downward. For equity-classified
freestanding financial instruments, such as warrants, an entity will treat the value
of the effect of the down round, when triggered, as a dividend and a reduction of income
available to common stockholders in computing basic earnings per share. The guidance
in ASU 2017-11 is effective for fiscal years beginning after December 15, 2018, and interim
periods within those fiscal years. Early adoption is permitted, and the guidance is to
be applied using either a full or modified retrospective approach. The Company is evaluating
the impact of the revised guidance.
|
NOTE 3:-
|
MARKETABLE EQUITY SECURITIES
|
The Company
owns 446,827 ordinary shares of Can-Fite representing approximately 1.59% of Can-Fite’s issued and outstanding share capital as
of December 31, 2017. This was an asset held by the Company as of the Closing Date and was initially recorded at fair value (quoted
market) on the Closing Date.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE 3:-
|
MARKETABLE EQUITY SECURITIES (Cont.)
|
As of December
31, 2017 and the Closing Date of the Merger, the fair value of the Company’s investment in Can-Fite’s shares was $323 and
$298, respectively (according to its quoted market price in the Tel-Aviv Stock Exchange). During the period commencing the Closing
Date of the Merger and ended December 31, 2017, the related unrealized gain derived from the change in the fair value of these
securities totaled $25 and is recorded as part of the accumulated other comprehensive income (loss).
NOTE
4:-
|
OTHER
CURRENT ASSETS
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
$
|
3
|
|
|
$
|
10
|
|
|
Governmental authorities
|
|
|
37
|
|
|
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
40
|
|
|
$
|
29
|
|
NOTE
5:-
|
LICENSE
AGREEMENT
|
In
May 2015, Wize Israel entered into the License Agreement with Resdevco, a company controlled by Professor Shabtay Dikstein, the
inventor of LO2A (“Dikstein”). Pursuant to the License Agreement, Resdevco granted to Wize Israel (and thereafter to
OcuWize) an exclusive license to develop in the United States, Israel and Ukraine (collectively, the “Licensed Territories”),
under the LO2A licensed technology, products in the field of ophthalmic disorders, and to mutually agree upon a manufacturer and
to purchase, market, sell and distribute LO2A in finished product form in the Licensed Territories in the field of ophthalmic disorders.
Subject to certain limited exceptions, Wize Israel may not sublicense or sell or transfer any of its rights under the License Agreement
without the advance written approval of Resdevco.
The
License Agreement granted Wize Israel the right to add additional territories in the future, subject to a commitment by Wize Israel
to pay minimum royalties according to a formula set forth in the License Agreement with respect to the additional territory, and
provided that Resdevco has not granted exclusive rights in such additional territory or is in ongoing negotiations. The License
Agreement also grants Wize Israel the right to purchase Resdevco’s agreements with its existing distributors of LO2A in other
jurisdictions (namely, Germany, Hungary, Netherlands and Switzerland (collectively, the “Reserved Territories”) for
ten times the greater of the net royalties received in the previous 12 months under such agreements or the minimum royalty payment
under such agreements. The License Agreement furthermore grants Wize Israel a right of first negotiation with potential distributors
to whom Resdevco may in the future grant distribution rights to LO2A outside of the Reserved Territories and the Licensed Territories
and provides that if Wize Israel enters into such distribution agreement in accordance with the License Agreement, then Wize Israel
has agreed to guarantee in writing to Resdevco that it will pay to Resdevco minimum royalties according to a formula set forth
in the License Agreement. The License Agreement historically included an option to purchase all remaining territories for a fixed
amount and such option was cancelled on March 30, 2017.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
5:-
|
LICENSE
AGREEMENT (Cont.)
|
The
License Agreement provides that Wize Israel is required to pay to Resdevco certain royalties for sales in the Licensed Territories
based on an agreed-upon price per unit payable on a semi-annual basis, subject to making certain minimum royalty payments, which
(1) with respect to the United States, means the non-refundable and non-deductible aggregate amount of $500 (“Minimum Commitment”)
over a period of three years commencing from 2015 ($400 out of which was already paid by Wize Israel) and an advance against royalties
of $475 per year starting January 1, 2018, as modified in July 2017, (see also Note 6b), which annual advance shall be credited
towards any royalties payable to Resdevco for that particular year, (2) with respect to Israel, means an upfront non-refundable
and non-deductible payment of $30, payable at commencement of local sales, and an annual advance against royalties starting January
1, 2017 in increasing payments depending on the year (up to a maximum of $36) which annual advance shall be credited towards any
royalties payable to Resdevco for that particular year, and (3) with respect to Ukraine, means an annual advance against royalties,
starting in 2016, in increasing payments depending on the year (up to a maximum of $30), which yearly advance shall be credited
towards any royalties payable to Resdevco for that particular year.
The
License Agreement has an initial term of seven years that expires in May 2022, and, unless Wize Israel provides prior notice of
at least 12 months terminating the agreement, the License Agreement renews automatically each year. Wize Israel may terminate
the License Agreement prior to May 2022 upon 180 days prior notice; provided that all payments previously made to Resdevco shall
be non-refundable, any payments due during the 180-day notice period shall be payable to Resdevco and Wize Israel is required
to pay a penalty of $100, depending on the timing of termination. Additionally, if Wize Israel terminates the License Agreement,
it is required to exert reasonable best efforts to find a third-party willing to sell LO2A under the same terms as the License
Agreement (see also Note 1a).
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 and CCH and in the Netherlands for the treatment of DES and Sjögren’s
.
Wize
Israel intends to market LO2A as a treatment for DES and other ophthalmic inflammations, including CCH and Sjögren’s
in the United States, Israel, Ukraine, the territories that it has licensed LO2A, and in additional territories, subject to purchasing
the rights to market, sell and distribute LO2A in those additional territories. Wize Israel believes that the potential for the
most economic success is in marketing LO2A for treating CCH and Sjögren’s. Currently, Wize Israel has a distribution
agreement for marketing in Israel, where LO2A is approved for the treatment of DES only, and a distribution agreement for marketing
in Ukraine, where LO2A is in the approval process for the treatment of DES. The registration process in certain countries,
including the United States, requires Wize Israel to conduct additional clinical trials, in addition to the Phase II clinical
trials that Wize Israel is conducting.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
5:-
|
LICENSE
AGREEMENT (Cont.)
|
Wize
Israel plans to engage local or multinational distributors to handle the distribution of LO2A. In particular, Wize Israel intends
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 Wize Israel
prioritizing those territories where Wize Israel may expedite the registration process of LO2A based on existing knowledge and
studies previously conducted on LO2A, without requiring additional studies. There is no assurance that the Company will be able
to market the Product in any other jurisdictions.
The
fair value of the Minimum Commitment to pay royalties as stated as of its initial recognition date was calculated based on an
estimate of the fair value of the payments set in the License Agreement in accordance with the dates set in the License Agreement
using a discount rate of 21%, which reflected, among other things, Wize Israel’s estimate of its equity rate as of that
date. At initial recognition, the fair value of the Minimum Commitment was estimated in an amount of $397. As of December 31,
2017, the commitment to pay future royalties amounting to $250 (see also Note 6).
The
License Agreement may be terminated by either party upon the occurrence of certain other customary termination triggers, including
material breaches of the License Agreement by either party, as well as the right of Resdevco to terminate the License Agreement
(or halt the manufacturing agreement or cease delivery of any finished product for any period of time) as a result of Wize Israel
not paying all royalties due under the License Agreement. In addition, Resdevco may terminate the License Agreement, upon 30 days
written notice, if (1) an application for the marketing approval of LO2A, for the treatment of DES is not submitted to the United
States Food and Drug Administration (“FDA”) or the equivalent regulatory authority in the Licensed Territories by May
1, 2019, (2) such FDA approval is not obtained from the FDA or the equivalent regulatory authority in the Licensed Territories
by May 1, 2021, (3) such approval has been obtained, but commercial sales of LO2A have not commenced within three months thereafter,
(4) commercial sales of LO2A have commenced, any royalties, including any minimum royalties are not timely paid, or (5) Wize Israel
attempts to sell competing products (as defined in the License Agreement) in or outside the Licensed Territory. Resdevco may also
terminate the License Agreement if Wize Israel contests the validity of any patents covering LO2A or any related know-how or if
Wize Israel makes, sells or exploits a competing product to LO2A. On November 18, 2015, a framework agreement was signed for cooperation
between the Company and the manufacturing plant, the Company began the processes needed to approve the Product with the FDA, and
as of the preparation of these consolidated financial statements, the Company believes that it has complied with this framework
agreement.
Stock
allocation within the framework of the License Agreement
:
In
connection with the entering into of the License Agreement, on June 11, 2015, the Company granted 36,397 shares of common stock
with no par value to a third-party consultant for direct consultation and mediation services provided to the Company in connection
with the License Agreement.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
5:-
|
LICENSE
AGREEMENT (Cont.)
|
The
fair value of shares of common stock granted amounted to $801, and was estimated by multiplying the number of 36,397 shares of
common stock granted at the stock price quoted on the stock exchange as of the approval of the grant, while taking into account
the discount at a rate of 10.3% (which was calculated by an independent outside valuator, using the Finerty Model for pricing
options, based on the sales option model with an average exercise price) for the impact of the restrictions set in the Israeli
Securities law and in the Israeli Securities regulations applicable to the recipient regarding the sale of the allocated shares
(“Discount due to Blockage Restriction”).
In
addition, it was decided within the framework of the transaction that the third - party would be granted shares constituting 5%
of the issued and outstanding share capital of OcuWize intended to manage and develop all of the activity subject to the License
Agreement. The allocation of the OcuWize’s shares shall be for future consultation services granted to OcuWize in connection with
the activity covered by the License Agreement, as it will be agreed between the Company and the consultant. As of December 31,
2017 and as of the approval of the consolidated financial statements, the terms of such grant have not been determined, the Company
has made no such grant and has received no third - party consultation services.
As
the License Agreement related to an exclusive right to market, sell and distribute in the United States, of a Product that has
not been approved by the FDA it was determined that the current status of the Product as of the date of entering into the License
Agreement was is in substance an IPR&D. As the IPR&D was received by the Company through a direct acquisition and not
through a business combination and as it was determined that the IPR&D does not have future alternative use, the acquisition
cost, together with the related direct expenses (including the stock-based compensation as described above) amounted to $1,201
and was recognized as research and development expenses upon the Effective Date of the License Agreement as part of the statement
of comprehensive loss for the year ended December 31, 2015 (not presented herein).
In
addition to the exclusive license in the United States, the Company was given similar rights for the Israeli market. The Israeli
license term is seven years, following which the term will automatically renew for additional one - year periods. The Company
undertook to pay the Product registration expenses as well as license fees and annual royalties according to the mechanism set
forth in the Addendum (as amended on May 31, 2016). The Company has the right to terminate the License Agreement upon 180 days
prior notice, but only commencing from the start of the marketing of the Product in Israel. The Company undertook to take action
to approve the use of the Product in Israel within three years of signing the Addendum and undertook to sign an agreement with
the manufacturing plant in order to supply the Product to Israel. The Company reached agreements with the manufacturing plant
in March 2016, but production has not yet commenced. During the year ended December 31, 2016, the Company recorded direct costs
amounting to $30 as part of research and development expenses in connection with expanding the territory to Israel.
On
July 11, 2016, the Company entered into an Exclusive Distribution Agreement (the “Israeli Distribution Agreement”)
with an independent distributor in Israel (the “Israeli Distributor”) to distribute the Product in Israel.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
5:-
|
LICENSE
AGREEMENT (Cont.)
|
The
term of the Israeli Distribution Agreement is until December 31, 2018 and may be extended by three additional years, subject to
agreement between the parties on minimal yearly quotas from the Israeli Distributor and a minimum price of the Product. The Israeli
Distribution Agreement includes yearly minimal quotas, a minimum Product price and other terms of payment. Furthermore, the Israeli
Distributor undertook that during the term of the Israeli Distribution Agreement and up to 18 months from the end of the engagement
with the Company, the Israeli Distributor will not have any business connection with any business engaged in any activities involving
medical devices that are identical or imitations of the Product or of the Product then produced by Wize Israel or its subsidiaries
or affiliates.
In
December 2015, the Company entered into a Distribution Agreement (the “Ukrainian Distribution Agreement”) with a distributor
in Ukraine (the “Ukrainian Distributor”) to distribute the Product in Ukraine for a period of 3 years ending December
31, 2018, which may be extended to three additional years, subject to an agreement on the Ukrainian Distributor’s sales goals.
The
Ukrainian Distribution Agreement includes minimal yearly quotas, minimum prices and payment terms for the term of the agreement.
Furthermore, the Ukrainian Distributor undertook that during the term of the Ukrainian Distribution Agreement and up to 24 months
from the end of the engagement with the Company, the Ukrainian Distributor will not have any business connection with any business
engaged in any activities involving products that are identical to the Product, in the same formula, shape, doses and purposes.
The
distribution of the Product is subject to the receipt of all of the regulatory approvals required in Ukraine for marketing, importing,
selling and providing services in connection with the Product. The Ukrainian Distributor is responsible for securing such approvals
and will pay the necessary costs for procuring such approvals, with the exception of the Company’s payment of up to $10
in registration fees.
Following
the signing of the Exclusive Agreement with the Distributor, an addendum was signed to the License Agreement according to which
the Territory was expanded to include Ukraine. The Company undertook to pay the Product registration expenses in Ukraine as well
as license fees and yearly royalties of a sum of not less than $18 according to a mechanism set forth in the License Agreement.
The minimal payment of $18 to secure the license to distribute the Product in Ukraine was recorded as part of research and development
expenses and was paid in 2016.
On
October 26, 2017, Wize Israel announced the termination of its single-center trial in Israel that commenced in January 2017 (“Single
Center Trial”).
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
5:-
|
LICENSE
AGREEMENT (Cont.)
|
The
Single Center Trial was a Phase II, randomized, double-blind, placebo-controlled, pilot study carried out in parallel groups that
was intended to evaluate the safety and efficacy of LO2A for patients suffering from moderate to severe CCH, with Wize Israel
having sole access to the trial data. On October 24, 2017, Wize Israel received notice from the contract research organization
that manages and supervises Wize Israel’s clinical trials (“CRO”), that an inadequate amount of quality information
may be derived from the results collected thus far, given that there is no correlation in the reaction of both eyes to LO2A, in
contrast to professional literature and other trials. In addition, the recruitment rate of patients was less than required and
there was a higher than expected dropout rate. In light of the above, the CRO concluded that the results of the trial would be
of no use even if the trial continued until the end of its term. Based on the CRO’s conclusion, Wize Israel determined to
terminate the trial and to save the future costs that would be incurred in connection with such trial.
On
November 3, 2017, Wize Israel entered into a framework agreement with a Chinese pharmaceutical company (the “Chinese Distributor”),
whereby, subject to the negotiation and execution of a detailed distribution agreement and obtaining necessary regulatory approvals
in China, the Chinese Distributor will act as exclusive distributor in China of LO2A. The framework agreement includes, among
other things, minimum purchase obligations of the Chinese Distributor, which Wize Israel estimated to range, over the five-year
period of the contemplated agreement, between $22,500 to $39,000.
As
of the date hereof, no detailed distribution agreement has been entered into with the Chinese Distributor and the regulatory process
has not been completed and it is not possible at this stage to determine when these conditions will be completed, if ever, and,
even if completed, the final terms of such detailed distribution agreement and the expected revenues therefrom.
NOTE
6:-
|
LICENSE
PURCHASE OBLIGATION
|
|
a.
|
As
noted in Note 5, as consideration for the License Agreement, Wize Israel undertook to
pay a Minimum Commitment of licensing fees and royalties of no less than $500 in the
first three years of the engagement. An amount of $100 was paid in May 2015, upon signing
the License Agreement and amounts of $150 and $150 were paid in January 2016 and July
2017, respectively.
|
In
July 2017, Wize Israel and Resdevco amended the License Agreement pursuant to which the annual royalties’ amount of $475 will
be reduced to $150 for 2018 and 2019. If Wize Israel obtains an FDA marketing license during 2019, the Company will be required
to pay Resdevco the remainder of the payment of 2019. Consequently, during the third quarter of 2017 the Company has recognized an amount of $150 as an additional
liability with respect to the 2018 minimum commitment. Such amount is reflected as an expense under research and development expenses.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
6:-
|
LICENSE
PURCHASE OBLIGATION (Cont.)
|
|
b.
|
On
December 26, 2017, Wize Israel entered into an amendment to the License Agreement with
Resdevco (the “Third Amendment”) which includes (i) China in the list of
Licensed Territories, (ii) the size and timing of royalty payments, including the minimum
annual royalty payments, payable by Wize Israel to Resdevco in connection with its distribution
activities in China, and (iii) an undertaking by Wize Israel to include in the distribution
agreement to be entered into with the Chinese Distributor that the Chinese Distributor
will transfer the Chinese market license to Resdevco upon termination of the distribution
agreement. In the event Wize Israel fails to execute a distribution agreement with the
Chinese Distributor by June 1, 2018, the Third Amendment will be deemed null, void and
of no force.
|
|
c.
|
The
following table details the repayment dates of the remaining Minimal Commitment on the
financial liability and the balance in the consolidated financial statements:
|
|
|
|
As of
December 31,
|
|
|
|
|
2017
(*)
|
|
|
2016
(*)
|
|
|
Repayment dates:
|
|
|
|
|
|
|
|
|
|
January 1, 2017
|
|
$
|
-
|
|
|
$
|
150
|
|
|
January 1, 2018
|
|
|
250
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining balance
|
|
|
250
|
|
|
|
233
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liability
|
|
|
250
|
|
|
|
150
|
|
|
Non-current liability
|
|
|
-
|
|
|
|
83
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
250
|
|
|
$
|
233
|
|
|
(*)
|
Upon
initial recognition, the balance was discounted according to an annual discount rate
of 21%, which in management’s opinion reflected the Company’s credit risk as of the initial
recognition of the liability (see also Note 5).
|
|
d.
|
On
January 21, 2018, Resdevco agreed to postpone the minimum royalty payment obligation
amounting to $150 from January 1, 2018 to July 29, 2018 (see also note 12c).
|
NOTE
7:-
|
OTHER
ACCOUNTS PAYABLE
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Employees and payroll accruals (*)
|
|
$
|
101
|
|
|
$
|
79
|
|
|
Accrued expenses
|
|
|
95
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
196
|
|
|
$
|
214
|
|
|
(*)
|
As
of December 31, 2017 and 2016, most of the sum refers to a debt to the Company’s
Chief Executive Officer, with whom the Company had reached an agreement regarding postponing
the payment date. The debt is expected to be paid in the foreseeable future.
|
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
8:-
|
CONVERTIBLE
LOAN AND FINANCIAL DERIVATIVE LIABILITY FOR THE RIGHT TO FUTURE INVESTMENT
|
|
a.
|
On
March 20, 2016 (“2016 Loan Origination Date”), Wize Israel entered into a convertible
loan agreement (as amended on March 30, 2016, 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 2,000,000 (approximately $520 according to an exchange
rate at the 2016 Loan Origination Date), which bears interest at an annual rate of 4%
(the “2016 Loan”). Pursuant to the 2016 Loan Agreement, as modified by the
2017 Loan Agreement (see also Note 14b), the 2016 Loan had a maturity date of December
31, 2017 (the “Maturity Date”).
|
Under
the 2016 Loan Agreement, Rimon Gold has the right, at its sole discretion, to convert any outstanding portion of the 2016
Loan, but not less than NIS 100,000 (approximately $26 according to an exchange rate at the 2016 Loan Origination Date), into
Wize Israel’s ordinary shares at a conversion price per share of NIS 15.2592 (approximately $3.84 according to an
exchange rate at the 2016 Loan Origination Date), subject to adjustments for stock splits and similar events set forth in the
2016 Loan Agreement.
In
order to secure its obligations and performance pursuant to the 2016 Loan Agreement, Wize Israel recorded a first priority fixed
charge in favor of Rimon Gold on all of Wize Israel’s rights, including its distribution rights, under the License Agreement,
and a first priority floating charge on all of Wize Israel’s rights, title and interest in all of its assets, as may exist from
time to time (the agreements relating to such charges being referred to as the “Security Agreements”).
In
light of the assignment of the License Agreement to OcuWize as detailed in Note 5, in October 2016, OcuWize recorded identical
liens to the aforementioned liens against Wize Israel.
Rimon
Gold was entitled, under certain circumstances, to demand repayment of the 2016 Loan, including among others: (i) if Wize Israel
breaches or fails to perform or is shown to have made a false statement, under the 2016 Loan Agreement or the Security Agreements;
(ii) any failure of Wize Israel to make a timely payment; (iii) upon the appointment of a receiver; (iv) the imposition of a lien
on a material asset of Wize Israel (v) if Wize Israel files a motion to stay proceedings; (vi) upon the expiration or termination
of the License Agreement or if any party is in material breach of the License Agreement or if any party notifies the other of
its intention to terminate the License Agreement; (vii) an adverse material change; or (viii) upon the non-performance of Wize
Israel pursuant to the 2017 Loan Agreement (see also Note 8b).
The
2016 Loan Agreement and the Security Agreements contain a number of restrictive covenants that limit Wize Israel’s operating flexibility.
These covenants include, among other things, limitations on the creation of liens; on the incurrence of indebtedness; on dispositions
of assets, mergers, acquisitions and other change of control transactions; on changes in the general nature of the Company’s business;
restrictions on payments to related parties; restrictions on conducting rights offerings, and on the distribution of dividends.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
8:-
|
CONVERTIBLE
LOAN AND FINANCIAL DERIVATIVE LIABILITY FOR THE RIGHT TO FUTURE INVESTMENT (Cont.)
|
In
addition, under the 2016 Loan Agreement, Rimon Gold has the separable right (not contingent on electing conversion option), until
the lapse of 18 months following the conversion of the loan granted by Rimon Gold under the 2016 Loan Agreement (“Right to
Future Investment”), to invest up to NIS 3,000,000 (approximately $780 according to an exchange rate as of December 31, 2016),
in the aggregate, at a price per share that will reflect a 15% discount relative to the lowest price per share set for any Wize
Israel offering, private or public, if Wize Israel conducts any equity financing.
Based
on the original terms of the Right to Future Investment, management has determined that such right to acquire shares at a future
date in the potentially variable investment amount, at a variable purchase price per share represents a derivative liability according
to the provisions of ASC 815-40, “Derivatives and Hedging - Contracts in Entity’s Own Equity” (see also Note 2r above).
Wize
Israel used the services of an independent external appraiser to estimate the fair value of the derivative liability at the 2016
Loan Origination Date and each reporting date. The fair value of such liability was measured upon initial recognition in an amount
of NIS 423,000 (approximately $110 according to an exchange rate at the 2016 Loan Origination Date). The fair value was based
among other things on management’s estimates of 75% regarding the exercise probability of this right in a future offering and
the forecast regarding the timing of a future offering as of that date.
The
remaining amount of the 2016 Loan proceeds of NIS 1,577,000 (approximately $410 according to an exchange rate at the 2016 Loan
Origination Date) (“Debt”) was allocated to the 2016 Loan.
Wize
Israel applied ASC 470, “Debt with Conversion and Other Options”, pursuant to which Wize Israel recognized and measured
a Beneficial Conversion Feature (“BCF”) amounting to NIS 946,000 (approximately $247 according to an exchange rate at
the commitment date) by allocating a portion of the proceeds equal to the intrinsic value of the conversion feature to additional
paid-in-capital. The intrinsic value of the conversion feature was calculated on the 2016 Loan Origination Date by using the effective
conversion price. The discount resulting from the BCF is amortized over the life of the 2016 Loan through financial expenses by
using the effective interest method unless mandatorily converted earlier.
The
direct and incremental debt costs amounting to NIS 63,000 (approximately $16 according to an exchange rate at the 2016 Loan Origination
Date) were allocated to the Right to Future Investment and the 2016 Loan based on the same proportions as the proceeds allocation.
The portion that was allocated to the Right to Future Investment amounting to $4 has been expensed immediately to finance expenses
while the remaining amount of $12 was allocated and deducted from the 2016 Loan and is amortized over the life of the 2016 Loan
through financial expenses by using the effective interest method unless mandatorily converted earlier.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
8:-
|
CONVERTIBLE
LOAN AND FINANCIAL DERIVATIVE LIABILITY FOR THE RIGHT TO FUTURE INVESTMENT (Cont.)
|
For
the years ended December 31, 2017 and 2016, the Company recorded finance expenses amounting to $263 and $122, respectively, due
to the amortization of the discount that resulted from the BCF, the proceeds allocated to the derivative liability and the debt
issuance costs. In addition, for the years ended December 31, 2017 and 2016, the Company recorded interest expense amounting to
$22 and $16, respectively.
On
February 22, 2017 (“Modification Date”), the expiration date of the Right of Future Investment that was associated with
the 2016 Loan was extended from March 2018 to the end of the Option Period (see also Note 8b) and the exercise price was changed
from a 15% discount of the lowest price per share set for Wize Israel to a fixed price of NIS 20.4 per share. Accordingly, as
of the Modification Date, the Right of Future Investment was no longer considered as a derivative liability. In addition, the
difference between the fair value of the Right of Future Investment before and after the modification, which amounted to $246
was recognized as expenses within finance expenses, net for the year ended December 31, 2017. In addition, the then outstanding
amount related to the Right of Future Investment of $280 was reclassified from a derivative liability to equity upon the date
of modification (see also Note 2n).
In
December 2017, the Company amended the 2016 Loan (see also Note 8d).
|
b.
|
On January 15, 2017 (the “2017 Loan Origination Date”),
Wize
Israel entered into a convertible loan agreement (the “2017 Loan Agreement”) with Ridge, and, by way of entering into
assignments and assumption agreements following such date, also with Rimon Gold and Fisher (together, the “2017 Lenders”),
whereby each of the 2017 lenders extended a loan in the principal amount of NIS 1,000,000 (approximately $270 according to the
average exchange rate at the 2017 Loan Origination Date) and in the aggregate principal amount of NIS 3,000,000 (approximately
$811 according to the average exchange rate at the 2017 Loan Origination Date), which bears interest at an annual rate of 4% (the
“2017 Loan”). Pursuant to the 2017 Loan Agreement, the 2017 Loan had a maturity date of December 31, 2017 (the “Maturity
Date”).
|
Under the
2017 Loan Agreement, each of the 2017 Lenders has the right, at its sole discretion, to convert any outstanding portion of the
2017 Loan, but no less than NIS 100,000 (approximately $26 according to exchange rate as of 2017 Loan Origination Date), that the
lender provided to Wize Israel (each such portion converted, the “Converted Loan Amount”) into Wize Israel’s ordinary
shares at a conversion price per share equal to the lower of (
i
) NIS 24 (approximately $6.24
according to the exchange rate as of June 23, 2017) and (
ii
) the lowest price per share of
Wize Israel in any offering made by Wize Israel following the date of the 2017 Loan Agreement and through the date of such requested
conversion, subject to adjustments for stock splits and similar events set forth in the 2017 Loan Agreement (the “2017 Loan
Conversion Price”). As a result of the 2017 PIPE (see also Note 12c), the current 2017 Loan Conversion Price for Rimon Gold,
Fisher and Ridge was adjusted to NIS 16.8 (approximately $4.8 according to the exchange rate as of June 23, 2017).
WIZE
PHARMA INC. (FORMERLY: OPHTHALIX INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
8:-
|
CONVERTIBLE
LOAN AND FINANCIAL DERIVATIVE LIABILITY FOR THE RIGHT TO FUTURE INVESTMENT (Cont.)
|
In
addition, upon exercise of the conversion right, the 2017 Loan Agreement grants the 2017 Lenders, for a period of 18 months following
the conversion of the Converted Loan Amount, the right to make investments in Wize Israel in an amount equal to NIS 1.50 for each
NIS 1.00 of its respective Converted Loan Amount, at an agreed price per share equal to 120% of the then applicable 2017 Loan
Conversion Price (the “Investment Option”). All shares that will be received by the 2017 Lenders upon the conversion
of the 2017 Loan and upon the exercise of the Investment Option, will be unregistered shares. Such shares shall be restricted
from sale for a period of 180 days from the date the Investment Option was exercised.
Ridge
was entitled, under certain circumstances, to demand repayment of the 2017 Loan, including: (i) if Wize Israel breaches or fails
to perform or is shown to have made a false statement, under the 2017 Agreement or the Security Agreements; (ii) any failure of
Wize Israel to make a timely payment; (iii) upon the appointment of a receiver; (iv) the imposition of a lien on a material asset
of Wize Israel; (v) if Wize Israel files a motion to freeze proceedings; or (vi) an adverse material change.
The
2017 Loan contains a number of restrictive covenants that limit the Wize Israel’s operating flexibility. These covenants include,
among other things, limitations on the creation of liens; on the incurrence of indebtedness; on dispositions of assets, mergers,
acquisitions and other change of control transactions; on changes in the general nature of Wize Israel’s business; restrictions
on payments to related parties; and on the distribution of dividends.
As
discussed in Note 9, prior to entering into the 2017 Loan Agreement, Ridge provided the following three loans to Wize Israel,
all of which bore interest at an annual rate equal to the interest rates of the Israeli government bonds: (i) NIS 250,000 was
extended in November 2016, (ii) NIS 300,000 was extended in December 2016 and (iii) NIS 200,000 was extended in February 2017
(together, the “Ridge Interim Loans”).
On
March 30, 2017, after Ridge already provided NIS 250,000 under the 2017 Loan Agreement out of the NIS 1,000,000 committed by Ridge
thereunder, Ridge exercised its right to have the Ridge Interim Loans being treated as a portion of the remaining loan commitment
of NIS 1,000,000. As a result, the terms and conditions of the Ridge Interim Loans were modified to those included in the 2017
Loan Agreement.
As
of December 31, 2017, all the NIS 3,000,000 (including the above three loans amounting to NIS 750,000 and received from Ridge)
has been funded.
In
addition, as part of the 2017 Loan Agreement, Wize Israel and the other lenders agreed that (i) the security interests made under
the Security Agreements will also serve to secure the loans made by Rimon Gold under the 2017 Loan Agreement, and (ii) Rimon Gold
will have the right to be repaid the full 2016 Loan prior to any repayment of the 2017 Loan.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
8:-
|
CONVERTIBLE
LOAN AND FINANCIAL DERIVATIVE LIABILITY FOR THE RIGHT TO FUTURE INVESTMENT (Cont.)
|
The
Company has considered the provisions of ASC 815-15, “Derivatives and Hedging – Embedded Derivatives” (“ASC
815-15”), and determined that the embedded conversion feature of the 2017 Loan cannot be considered as clearly and closely
related to the host debt instrument, However, it was determined that the embedded conversion feature should not be separated from
the host instrument because the embedded conversion option, if freestanding, does not meet the definition of a derivative in accordance
with the provisions of ASC 815-10, since its terms do not require or permit net settlement. Thus, the conversion feature does
not meet the characteristic of being readily convertible to cash.
Wize
Israel applied ASC 470-20, “Debt - Debt with Conversion and Other Options” which clarifies the accounting for instruments
with BCF or contingently adjustable conversion ratios.
Pursuant
to ASC 470-20-30, the amount of the BCF with respect to the 2017 Loan was calculated at the commitment date, as the difference
between the conversion price (i.e. the entire proceeds received for the 2017 Loan) and the aggregate fair value of the common
stock and other securities (which consist of the Investment Option) into which the 2017 Loan is convertible.
As
such difference was determined to be greater than the amount of the entire proceeds received for the 2017 Loan, the amount of
the discount assigned to the BCF was limited to the amount of the entire proceeds.
Accordingly,
the BCF amounting to NIS 3,000,000 (approximately $811 according to the average exchange rate at the commitment date) was recorded
as a discount on the 2017 Loan with a corresponding amount credited directly to equity as additional paid-in capital. As a result,
upon initial recognition, the amount related to the 2017 Loan was NIS 0. After the initial recognition, the discount on the 2017
Loan is amortized as interest expense over the term of the 2017 Loan.
In
connection to the aforesaid 2017 Loan, Wize Israel had direct and incremental debt issuance costs amounting to NIS
90,000 (approximately $26 according to the exchange rate at the 2017 Loan Origination Date). Such costs were deferred and
presented as an asset because the amount presented for 2017 loan was NIS 0. In subsequent periods, such expenses are
amortized ratably over the term of the 2017 Loan. For the year ended December 31, 2017, Wize Israel recorded finance expense
amounting to $26.
For
the year ended December 31, 2017, Wize Israel recorded finance expenses amounting $833 ($281 out of which related to Ridge (see
also Note 8d)) due to the amortization of the discount that resulted from the BCF and the amortization of the debt issuance costs.
In addition, for the year ended December 31, 2017, Wize Israel recorded interest expense amounting to $25 ($9 out of which related
to Ridge (see also Note 9d)).
In
December 2017, the Company amended the 2017 Loan (see also Note 8d).
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
NOTE
8:-
|
CONVERTIBLE
LOAN AND FINANCIAL DERIVATIVE LIABILITY FOR THE RIGHT TO FUTURE INVESTMENT (Cont.)
|
|
c.
|
As discussed in Note 1d, the “2017 Loan Agreement” and the “2016 Loan Agreement”,
which both were originally convertible to ordinary shares of Wize Israel, became convertible as a result of the Merger into shares
of the Company’s common stock which are equal to the number of
Wize
Israel’s ordinary shares that were subject to a Convertible Loan immediately prior to the Closing Date of the Merger multiplied
by the Exchange Ratio at a proportionally adjusted conversion price.
|
|
d.
|
On
December 21, 2017, the Company, Wize Israel, Ridge, Rimon Gold and Fisher entered into
an amendment (the “Loan Amendment”) to the 2016 Loan Agreement and the 2017
Loan Agreement pursuant to which (i) the Maturity Date of 2016 Loan Agreement and the
2017 Loan Agreement was extended to December 31, 2018; (ii) the Right to Future Investment
of the 2016 Loan Agreement and the Investment Option of the 2017 Loan Agreement will
expire on June 30, 2019 (instead of 18 months following the conversion of the loans);
(iii) the principal amounts, conversion prices, the Right to Future Investment and the
applicable exercise price with respect to the 2016 Loan Agreement and the Investment
Option and the applicable exercise price with respect to the 2017 Loan Agreement, have
been determined and denominated in dollar amount; (iv) the irrevocable guarantee, dated
November 16, 2017, signed by the Company in favor of Rimon Gold in respect of the 2016
Loan Agreement and the 2017 Loan Agreement will continue to be valid in accordance with
its terms even after the aforementioned Loan Amendment; (v) the Right to Future Investment
of the 2017 Loan Agreement which was subject to conversion of the 2017 Loan has been
separated from the conversion option and is now considered as a separate instrument (vi)
all others terms as defined in the 2017 Loan Agreement are remained.
|
The
below table outlines the terms of the 2017 Loan and 2016 Loan that were amended to be denominated in U.S. dollars instead of NIS:
|
|
|
2017 Loan
|
|
|
2016 Loan
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate principal amount
|
|
$
|
(*) 822
|
|
$
|
531
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion price per Company’s share
|
|
$
|
1.1112
|
|
$
|
0.9768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate maximum of Right to Future Investment
|
|
$
|
(**) 1,233
|
|
$
|
797
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price of Right to Future Investment
|
|
$
|
1.332
|
|
$
|
1.308
|
|
|
|
(*) Principal
|
loan amount of $274 for each of the 2017 Lenders.
|
|
(**) Maximum
|
of Right to Future Investment of $411 for each of the
2017 Lenders.
|
The
Company applied the provisions of ASC 470-50, “Modifications and Extinguishments” (“ASC 470-50”), to determine
whether the amendment to the 2016 Loan Agreement and the 2017 Loan Agreement, represents extinguishment or a modification. As
it was determined that the modified terms of the financial instruments are substantially different than their original terms,
pursuant to ASC 470-50, the Loan Amendment was required to be accounted for as an extinguishment.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE
8:-
|
CONVERTIBLE
LOANS AND FINANCIAL DERIVATIVE LIABILITY FOR THE RIGHT TO FUTURE INVESTMENT (Cont.)
|
Accordingly,
each of the modified financial instruments were initially recorded at fair value. Then, the total fair value of the modified financial
instruments related to the 2017 Loan and 2016 Loan (the “Reacquisition Price”) was allocated to the original financial
instruments included in the 2017 Loan and 2016 Loan, as applicable, based on the relative fair value of such financial instruments
as of the date of the extinguishment. As a result, an aggregate amount of $2,104 was allocated to the 2016 Loan and an aggregate amount
of $2,985 was allocated to the 2017 Loan.
The difference
between the Reacquisition Price that was allocated to the Right to Future Investment amounting to $704 which was included in the
2016 Loan and its fair value as of that date amounting to $701 was recorded directly to additional paid in capital (as a deemed
dividend in an amount of $3). In addition, the Reacquisition Price that was allocated to the newly detachable right to future investment
related to the 2017 Loan was recognized directly to additional paid-in capital. Such financial instruments amounted to $1,115 as
of December 21, 2017. The remaining amount of the Reacquisition Price that was allocated to the 2017 Loan and 2016 Loan which included
an embedded BCF was firstly attributed to the repurchase of the BCF based on the intrinsic value of the conversion feature at the
extinguishment date and the residual amounts, were allocated to the 2017 Loan and 2016 Loan. The difference between such residual
amounts and the carrying value of the 2017 Loan and 2016 Loan was recorded as loss on extinguishment amounting to $61 of the 2017
Loan and 2016 Loan.
Following
such allocation, the Company has determined based on the effective conversion price, that the conversion of the loans is not beneficial.
Thus, no BCF was required to be recognized.
|
e.
|
The
below table describes the roll forward of 2017 Loan and 2016 Loan:
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
289
|
|
|
$
|
-
|
|
|
Proceeds from issuance of convertible loan, net of issuance cost
|
|
|
811
|
|
|
|
508
|
|
|
Recognition of derivative liability related to 2016 Loan
|
|
|
-
|
|
|
|
(110
|
)
|
|
Recognition of BCF as a discount of 2017 Loan
|
|
|
(811
|
)
|
|
|
(247
|
)
|
|
Amortization of discounts resulting from BCF and derivative liability and debt issuance costs related to 2017 Loan and 2016 Loan
|
|
|
1,122
|
|
|
|
122
|
|
|
Accrued interest on 2017 Loan and 2016 Loan
|
|
|
47
|
|
|
|
16
|
|
|
Derecognition of carrying amount of 2016 Loan and 2017 Loan upon extinguishment
|
|
|
(1,458
|
)
|
|
|
-
|
|
|
Amount allocated to 2016 and 2017 Loan based on modified terms
|
|
|
3,204
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,204
|
|
|
$
|
289
|
|
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 9:-
|
LOANS
FROM CONTROLLING SHAREHOLDER
|
|
a.
|
On
November 15, 2016, Wize Israel’s Board of Directors (after receiving the approval of
the Audit Committee on November 14, 2016) approved the receipt of a short-term bridge
loan (“Loan”) in amount of NIS 250,000 (approximately $65 according to an exchange
rate as of November 15, 2016) from Ridge. The Loan was received on November 21, 2016.
The Loan was not linked to any index, had no collateral and bears yearly interest at
the level of the interest rate of Israel State Bonds (0.1% as of December 31, 2016).
The Loan’s repayment date shall be by the end of the first quarter of 2017 but
may be extended from time to time at the Shareholder’s discretion.
|
|
b.
|
On
December 25, 2016, Wize Israel’s Board of Directors (after receiving the approval of
the Audit Committee on November 14, 2016) approved the receipt of an additional short-term
bridge loan of NIS 300,000 (approximately $78 according to an exchange rate as of December
25, 2016) from the Shareholder under the same terms to those described above. NIS 200,000
(approximately $52 according to an exchange rate as of December 31, 2016) was received
in December 2016 and the remaining amount of NIS 100,000 (approximately $27 according
to an exchange rate as of December 31, 2016) was received after December 31, 2016. Accordingly,
as of December 31, 2016, the total balance of the short-term bridge loans amounted to
NIS 450,000 (approximately $117 according to an exchange rate as of December 31, 2016).
|
|
c.
|
On
February 19, 2017, Wize Israel’s Board of Directors (after receiving the approval
of the Audit Committee on February 16, 2017), approved the receipt of an additional short-term
bridge loan of NIS 200,000 (approximately $55 according to the exchange rate as of February
19, 2017) from Ridge. The loan was not linked to any index, has no collateral and bears
yearly interest at the level of the interest rate of Israel State Bonds.
|
The
loan’s repayment date shall be by the end of the first quarter of 2017 and will serve the Company in its current activity.
Ridge may extend the loan’s redemption date from time to time at its discretion.
On
March 30, 2017, Wize Israel and Ridge agreed to convert the entire balance of the aforesaid bridge loans referenced above amounting
to an aggregate amount of NIS 750,000 (approximately $206 according to the exchange rate as of March 31, 2017) as part of the
2017 Loan, the revised terms and conditions of which are described in Note 8b.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 10:-
|
TAXES
ON INCOME
|
|
a.
|
Tax
rates applicable to the Company:
|
On
December 22, 2017, the Tax Cuts and Jobs Act was enacted and made key changes to US tax law which include (i) establish a flat
corporate income tax rate of 21% to replace current rates that range from 15% to 35% and eliminates the corporate alternative
minimum tax; (ii) create a territorial tax system rather than a worldwide system, which will generally allow companies to repatriate
future foreign source earnings without incurring additional US taxes by providing a 100% exemption for the foreign source portion
of dividends from certain foreign subsidiaries; (iii) subject certain foreign earnings on which US income tax is currently deferred
to a one-time transition tax; (iv) create a “minimum tax” on certain foreign earnings and a new base erosion anti-abuse
tax (BEAT) that subjects certain payments made by a US company to a related foreign company to additional taxes; (v) create an
incentive for US companies to sell, lease or license goods and services abroad by effectively taxing them at a reduced rate; (vi)
reduce the maximum deduction for Net Operating Loss (NOL) carryforwards arising in tax years beginning after 2017 to a percentage
of the taxpayer’s taxable income, allows any NOLs generated in tax years beginning after December 31, 2017 to be carried
forward indefinitely and generally repeals carrybacks; (vii) elimination of foreign tax credits or deductions for taxes (including
withholding taxes) paid or accrued with respect to any dividend to which the new exemption applies, but foreign tax credits will
continue to be allowed to offset tax on foreign income taxed to the US shareholder subject to limitations; (viii) limit the deduction
for net interest expense incurred by US corporations, (ix) allow businesses to immediately write off (or expense) the cost of
new investments in certain qualified depreciable assets made after September 27, 2017 (but would be phased down starting in 2023);
(x) may require certain changes in tax accounting methods for revenue recognition; (xi) repeal the Section 199 domestic production
deductions beginning in 2018; (xii) eliminate or reduce certain deductions, exclusions and credits, and adds other provisions
that broaden the tax base.
After the enactment
of the Tax Act, the SEC issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of U.S.
GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations)
in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company has calculated an estimate
of the impact of the Tax Act in our year-end income tax provision in accordance with our understanding of the Tax Act and guidance
available as of the date of this filing. The provisional amount related to the re-measurement of our net U.S. deferred tax asset,
based on the rate at which they are now expected to reverse in the future, considered immaterial, but which was fully and equally
offset by a corresponding reduction in the Company’s valuation allowance. The effect of the change in federal corporate tax rate
from 34% to 21% is subject to change based on resolution of estimates used in determining the amounts of deferred tax assets and
liabilities that were re-measured. The Company will reflect any adjustments to the provisional amounts in the period the accounting
is completed and expects to complete this analysis within the one-year measurement period provided by SAB 118.
The
change in U.S tax law has no impact on the consolidated financial statements.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 10:-
|
TAXES
ON INCOME (Cont.)
|
|
b.
|
Tax
rates applicable to Wize Israel and OcuWize:
|
|
1.
|
Taxable
income of the Subsidiary is subject to the Israeli Corporate tax rate which was 24%,
25% and 26.5% in 2017, 2016 and 2015 respectively.
|
|
2.
|
On
January 5, 2016, the Israeli Parliament officially published the Law for the Amendment
of the Israeli Tax Ordinance (Amendment 216), that reduces the standard corporate income
tax rate from 26.5% to 25%.
|
|
3.
|
In
December 2016, the Israeli Parliament approved the Economic Efficiency Law (Legislative
Amendments for Applying the Economic Policy for the 2017 and 2018 Budget Years), a reduction
of the corporate tax rate in 2017 from 25% to 24%, and in 2018 and thereafter from 24%
to 23%.
|
The
change in Israeli tax law has no impact on the consolidated financial statements.
|
c.
|
Net
operating loss carry forward:
|
As of December 31,
2017, the Company evaluated its net operating loss carryforwards for federal income tax purposes of approximately $3 million which
expire in the years 2019 to 2037. The Company is still conducting a Section 382 analysis, which it expects to complete in the
second quarter of 2018.
The Company
has no operating loss carryforwards for income tax purposes. Utilization of the U.S. net operating losses may be subject to substantial
annual limitation due to the “change in ownership” provisions of the Internal Revenue Code of 1986 and similar state
provisions. The annual limitation may result in the expiration of net operating losses before utilization.
As of December 31,
2017, the Company’s subsidiaries, Wize Israel and OcuWize have accumulated losses for tax purposes in the amount of approximately
$7,337 and $231 respectively, which may be carried forward and offset against taxable income in the future for an indefinite period
in Israel.
|
d.
|
As
of December 31, 2017, Wize Israel’s 2011 tax assessment considered final. OcuWize has
not received final tax assessment since its inception.
|
|
e.
|
Loss
before taxes on income consists of the following:
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Domestic
|
|
$
|
2
|
|
|
$
|
-
|
|
|
Foreign (*)
|
|
|
2,964
|
|
|
|
1,139
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,966
|
|
|
$
|
1,139
|
|
(*) Relates to Wize Israel.
WIZE PHARMA INC. (FORMERLY:
OPHTHALIX INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 10:-
|
TAXES
ON INCOME (Cont.)
|
|
f.
|
Deferred
income taxes:
|
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s deferred tax assets are
as follows:
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Operating loss carry forward
|
|
$
|
1,688
|
|
|
$
|
1,293
|
|
|
Reserves and allowances
|
|
|
8
|
|
|
|
4
|
|
|
Research and development
|
|
|
8
|
|
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset before valuation allowance
|
|
|
1,704
|
|
|
|
1,312
|
|
|
Valuation allowance
|
|
|
(1,704
|
)
|
|
|
(1,312
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
-
|
|
|
$
|
-
|
|
In
assessing the realization of deferred tax assets, management considers whether it is more likely than not that all or some portion
of the deferred tax assets will not be realized. The ultimate realization of the deferred tax assets is dependent upon the generation
of future taxable income during the periods in which temporary differences are deductible and net operating losses are utilized.
Based on consideration of these factors, the Company recorded a full valuation allowance at December 31, 2017 and 2016.
|
g.
|
Below
is the reconciliation between the “theoretical” income tax expense or benefit,
assuming that all the income was taxed at the regular tax rate applicable to companies
in Israel and the taxes recorded in the statements of comprehensive loss in the reporting
year:
|
|
|
|
Year ended
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Loss before taxes on income, as reported in the statements of comprehensive loss
|
|
|
2,966
|
|
|
|
1,139
|
|
|
|
|
|
|
|
|
|
|
|
|
Theoretical tax benefit on this loss
|
|
|
716
|
|
|
|
285
|
|
|
Expenses not deductible for tax purposes
|
|
|
(51
|
)
|
|
|
(66
|
)
|
|
Increase in taxes resulting mainly from taxable losses in the reported year for which no deferred tax assets were recognized
|
|
|
(665
|
)
|
|
|
(219
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Tax benefit
|
|
|
-
|
|
|
|
-
|
|
NOTE 11:-
|
COMMITMENTS
AND CONTINGENCIES
|
From April
2015 to September 2015, Wize Israel and its directors who were also employees of Wize Israel received a number of letters from
Go D.M. Investments Ltd (“Go D.M.”), an Israeli public company, engaged at the time in the field of repositioning of
drugs, regarding its claims on various issues.
On January
16, 2017, a settlement was signed between Go D.M. and certain parties related to the abovementioned litigation.
On January
19, 2017, the Settlement was submitted to the Tel Aviv District Court for approval. On the same date, the Court ruled that the
Settlement would be given the force of a legal ruling subject to meeting the preconditions as per the Settlement, including the
Court’s approval of the arrangement in accordance with Section 350 of the Companies Law, 1999, and by February 21, 2017 the parties
will update the Court on compliance with these conditions, and in the event that this takes place, the Settlement will be given
the force of a legal ruling.
On March
26, 2017, the parties entered into settlement agreement pursuant to which it was agreed on final, full and absolute waiver of any
claims, suits and demands by the parties for legal proceedings and/or by anyone operating on their behalf (including subsidiaries,
controlling shareholders and interested parties, executives and officers, directors).
WIZE PHARMA INC. (FORMERLY:
OPHTHALIX INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 11:-
|
COMMITMENTS
AND CONTINGENCIES (Cont.)
|
|
1.
|
Commencing April 1, 2015, the Company entered into a rental agreement regarding its offices from WTP Israel
(Product Waste) Ltd., which is under the control, inter alia, of Messrs. Avner Arazi (“Arazi”) and Amir Bramli (“Bramli”),
who are shareholders of the Company (the “Rental Agreement”), on back to back conditions, at the same cost borne by the
owner, to amount of $4 per month. In January 2016, the Company discontinued the Rental Agreement described above with no additional
costs.
|
|
2.
|
On March 31, 2016, the Company signed an agreement to rent an office from an unrelated third party. The
rental period is one year from that date, but it can be discontinued with 30 days’ advance written notice. The rental fees
amounted to $1 per month plus participation in office usage expenses. Starting April 2017, the Company rents its offices from another
third party for a rental fee of a $ 2 with an option to terminate the lease at any time.
|
|
3.
|
For
the Company’s engagement in a License Agreement to market a drug and amendment to such
an agreement, see also Note 5 above.
|
|
4.
|
On June 19, 2017 (the “Effective Date”), Wize Israel entered into a finder’s fee agreement
with a service provider (through his wholly owned company), who is also a director of the
Company
(the “Vendor”), pursuant to which the Vendor is entitle to receive a royalty rate of 5% on all of Wize Israel’s
revenues to the extent such revenues are earned from relationships initiated by the Vendor and agreed to by Wize Israel. The term
of the agreement is for 12 months unless earlier terminated. Either party may terminate upon 21 days’ notice.
|
The Vendor introduced Wize
Israel and the Company to the Chinese Distributor (see also Note 5). During the period commencing the Effective Date and ended
December 31, 2017, the vendor has not earned any royalties, and the Company has no obligation to pay any royalties.
NOTE 12:-
|
STOCKHOLDERS’
DEFICIT
|
|
a.
|
The
common stock confers upon their holders the right to participate and vote in general
shareholder meetings of the Company and to share in the distribution of dividends, if
any, declared by the Company, and rights to receive a distribution of assets upon liquidation.
|
|
b.
|
On December 11, 2017, the Company announced a notice of special meeting of stockholders, according to
which, a special meeting of the stockholders was held on February 19, 2018, for the purpose of considering to grant the Company’s
Board of Directors the authority, in its sole direction, to approve an amendment to the Company’s Certificate of Incorporation
to effect a reverse stock split of the Company’s issued and outstanding common stock by a ratio of not less than 1-for-10 and not
more than 1-for-200. On February 19, 2018, the stockholders of the Company approved a reverse stock split of the Company’s
issued and outstanding common stock by a ratio of not less than one for ten and not more than one for two hundred at any time prior
to February 19, 2019, with such ratio to be determined by the Company’s Board of Directors, in its sole discretion. On February
22, 2018, the Company’s Board of Directors approved a reverse stock split of the Company’s issued and outstanding common
stock by a ratio of 1-for-24 (“Reverse Stock Split”) (see also Note 15g).
|
For accounting
purposes, all share and per share amounts for Common Stock, warrants stock, options stock (including Right for Future Investment
and Investment Option) and loss per share amounts have been adjusted to give retroactive effect to the Reverse Stock Split (see
also Note 1d) for all periods presented in these consolidated financial statements. Any fractional shares that resulted from the
Reverse Stock Split have been rounded up to the nearest whole share.
On June 23,
2017, Wize Israel entered into a Private Placement Agreement (the “2017 PIPE Agreements”) with each of Eliahu Peretz
(“Peretz”), Yaacov Zrachia (“Zrachia”), Simcha Sadan (“Sadan”) and Jonathan Brian Rubini (“Rubini”,
and together with Peretz, Zrachia and Sadan, the “2017 PIPE Investors”). Pursuant to the 2017 PIPE Agreements, the 2017
PIPE Investors agreed to invest a total of NIS 3,490,000 (approximately $966) in exchange for a total of 860,987 ordinary shares
of Wize Israel (the “2017 PIPE”), at a price per share of NIS 4.05 (approximately $1.15), with Peretz undertaking to
invest NIS 490,000 (approximately $139 according to the exchange rate as of June 23, 2017) in exchange for the private placement
of 120,884 ordinary shares of Wize Israel (the “Peretz Investment”) and each of Zrachia, Sadan and Rubini (the “Other
Investors”) undertaking to invest NIS 1,000,000 (approximately $282 according to the exchange rate as of June 23, 2017) in
exchange for the private placement of 246,701 ordinary shares of Wize Israel each (together, the “Other Investments”).
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 12:-
|
STOCKHOLDERS’
DEFICIT (Cont.)
|
Subject to
the Closing Date of the Merger (see also Note 1d), Wize Israel also undertook to cause the Company to grant warrants to each of
the 2017 PIPE Investors Warrants, with each Warrant being exercisable into one share of the Company’s common stock, par value
$0.001 per share (the “Common Stock”), with a term of three years from the date of grant. According to the 2017 PIPE
Agreements, the number of Warrants and the exercise price thereof will reflect, prior to giving effect to an adjustment based on
the Exchange Ratio, (i) 30,625 warrants to Peretz and (ii) 62,500 warrants to each of the Other Investors, each warrant exercisable
into one ordinary share of Wize Israel, at an exercise price of NIS 28.8 per share (approximately $8.4 according to the exchange
rate as of December 31, 2017). According to the Exchange Ratio, Peretz was granted 126,928 Warrants exercisable into Common Stock
and each of the Other Investors was granted 259,036 Warrants exercisable into Common Stock.
Sadan’s
commitment to provide his portion of the Other Financing was conditioned upon Wize Israel not raising more than NIS 3,500,000 (approximately
$988 according to the exchange rate as of June 23, 2017) and not less than NIS 2,000,000 (approximately $565 according to the exchange
rate as of June 23, 2017) in the 2017 PIPE, including the amount to be invested by Sadan.
On June 22,
2017, Ridge provided notice to Wize Israel that it has waived its right to adjust the 2017 Loan Conversion Price in connection
with the Peretz Investment. In July 2017, Wize Israel completed the Peretz Investment and Other Investments. However, Ridge did
not waive its right to adjust the 2017 Loan Conversion Price in connection with the Other Investments.
As a result
of the Peretz Investment and Other Investments, the current 2017 Loan Conversion Price for Rimon Gold, Fisher and Ridge was adjusted
from NIS 24.00 (approximately $6.72 according to the exchange rate as of June 23, 2017) to NIS 16.8 (approximately $4.8 according
to the exchange rate as of June 23, 2017) and as a result of the Merger, the 2017 Loan Conversion Price of NIS16.8 (approximately
$4.8) was adjusted in accordance with the Exchange Ratio to NIS 4.05 (approximately $1.15). As a result of the 2017 Loan Amendment,
the aggregate principal amount of the 2017 Loan is $822,144 and the 2017 Loan Conversion Price was adjusted to $1.1112.
During the
period ended December 31, 2017, the investment amount of NIS 3,490,000 (approximately $1 million according to the exchange rate
as of December 31, 2017) from Peretz Investment and Other Investments has been received and the Company issued a total of 860,987
ordinary shares and the warrants described above.
|
d.
|
See
Notes 8a and 8b regarding the Rights to Future Investment in the Company.
|
Wize
Israel had a negligible number and rate of shares from the issued capital originating from purchases prior to its Creditors’
Arrangement in 2015, the historic accumulated cost of which amounted to $747.
All
shares of Wize Israel held immediately prior to the Closing Date of the Merger by Wize Israel as treasury stock or otherwise,
if any, and by the Company or any direct or indirect wholly owned subsidiary of the Company, were cancelled and no payment will
be made with respect to those shares. Each issued and outstanding share of Merger Sub’s ordinary shares converted into one
ordinary share of the post-merger Wize Israel, which will represent the only outstanding shares of capital stock of the post-merger
Wize Israel from and after the Closing Date of the Merger.
|
f.
|
Stock
based-compensation:
|
In
2012, the Company’s Board of Directors approved the adoption of the 2012 Stock Incentive Plan (the “2012 Plan”). An
Israeli annex was subsequently adopted in 2013 to comply with the requirements set by the Israeli law in general and in particular
with the provisions of section 102 of the Israeli tax ordinance. Under the 2012 Plan and Israeli annex, the Company may grant
its officers, directors, employees and consultants, stock options, restricted stocks and Restricted Stock Units (“RSUs”)
of the Company. Each Stock option granted shall be exercisable at such times and terms and conditions as the Company’s Board of
Directors may specify in the applicable option agreement, provided that no option will be granted with a term in excess of 10
years. Upon the adoption of the 2012 Plan, the Company reserved for issuance 45,370 shares of Common Stock.
As of December 31, 2017, the Company has 40,474 shares of Common Stock available for future grant under the 2012 Plan. As noted
in Note 15e, the Company’s Board of Directors approved the adoption of the 2018 Stock Incentive Plan.
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 12:-
|
STOCKHOLDERS’
DEFICIT (Cont.)
|
As
of August 20, 2015, Wize Israel’s Board of Directors authorized through its 2015 Incentive Option Plan (the “2015 Plan”),
the grant of options to officers, directors, advisors, management and other key employees. Wize Israel reserved for grants of
options up to 2,000,000 of its Ordinary Shares. The exercise price and the vesting schedule of the options granted will be subject
to Wize Israel’s Board of Directors discretion and expire 2 years after the ending of the vesting schedule on each batch. As noted
in Note 1d, upon the Closing Date of the Merger, all the outstanding options under 2015 Plan have been cancelled.
Transactions
related to the grant of options to employees and directors under the 2012 Plan during the year ended December 31, 2017, were
as follows:
|
|
|
Year ended
December 31, 2017
|
|
|
|
|
Number of options
|
|
|
Weighted average exercise price
|
|
|
Weighted average remaining contractual life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at beginning of year
|
|
|
4,896
|
|
|
$
|
0.33
|
|
|
|
3.86
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding and exercisable at end of year
|
|
|
4,896
|
|
|
$
|
0.33
|
|
|
|
4.86
|
|
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 12:-
|
STOCKHOLDERS’
DEFICIT (Cont.)
|
Transactions
related to the grant of options to employees and directors under the 2015 Plan during the year ended December 31,
2017, were as follows:
|
|
|
Year ended
December 31, 2017
|
|
|
|
|
Number of options
|
|
|
Weighted average exercise price
|
|
|
Weighted average remaining contractual life
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding at beginning of year
|
|
|
109,659
|
|
|
$
|
3.7
|
|
|
|
2.16
|
|
|
Exercised (*)
|
|
|
(31,439
|
)
|
|
|
0.82
|
|
|
|
|
|
|
Expired (see Note 12f)
|
|
|
(78,220
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding and exercisable at end of year
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
(*)
|
On
October 26, 2017 (prior to the merger transaction as described in Note 1d), the chairman
of the Board of Directors of Wize Israel (“Chairman”) exercised 25,904 stock
options into 25,904 ordinary shares of Wize Israel at an exercise price per share of
NIS 2.89 (approximately $0.82) for a total amount of $21. On November 8, 2017, the
Chairman exercised additional 5,535 stock options into 5,535 ordinary shares of Wize
Israel on a cashless exercise basis.
|
The
aggregate intrinsic value represents the total intrinsic value (the difference between the deemed fair value of the Company’s
Common Stock on the last day of fiscal 2017 and the exercise price, multiplied by the number of in-the-money options) that would
have been received by the option holders had all option holders exercised their options on December 31, 2017. This amount
is impacted by the changes in the fair value of the Company’s shares.
The
stock-based compensation expense amounting to $33 and $65 during the years ended December 31, 2017 and 2016 was recognized as
part of general and administrative expenses in the consolidated statements of comprehensive loss.
On February
22, 2018, the Company’s Board of Directors approved the adoption of the 2018 Stock Incentive Plan, including an Israeli annex,
in order to grant to its employees, directors, consultants and/or contractors’ stock options, shares of Common Stock, restricted stock and restricted stock units of the Company (see also Note 15e).
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 13:-
|
SELECTED
STATEMENTS OF OPERATIONS DATA
|
|
a.
|
General
and administrative expenses:
|
|
|
|
Year
ended
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Overseas travel
|
|
$
|
72
|
|
|
$
|
16
|
|
|
Rent and office maintenance
|
|
|
53
|
|
|
|
27
|
|
|
Payroll and benefits
|
|
|
300
|
|
|
|
343
|
|
|
Professional services and consultation
|
|
|
472
|
|
|
|
303
|
|
|
Taxes and tolls
|
|
|
46
|
|
|
|
31
|
|
|
Director salary and insurance
|
|
|
63
|
|
|
|
63
|
|
|
Others
|
|
|
25
|
|
|
|
11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,031
|
|
|
$
|
794
|
|
|
b.
|
Financial
expenses, net:
|
|
|
|
Year ended
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Financial income:
|
|
|
|
|
|
|
|
|
|
Change in the fair value of derivative liability for Right to Future Investment
|
|
$
|
-
|
|
|
$
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finance income
|
|
|
-
|
|
|
|
76
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses:
|
|
|
|
|
|
|
|
|
|
Accrued interest on 2016 Loan
|
|
|
47
|
|
|
|
16
|
|
|
Amortization of BCF, proceeds allocated to the derivative liability and debt issuance costs for 2016 Loan
|
|
|
1,122
|
|
|
|
122
|
|
|
Amortization of discount and exchange rate differences on license purchase obligation
|
|
|
3
|
|
|
|
38
|
|
|
Bank commissions and exchange rates
|
|
|
(1
|
)
|
|
|
5
|
|
|
Change in the fair value of derivative liability for right to future investment
|
|
|
253
|
|
|
|
-
|
|
|
Loss from extinguishment of convertible loans
|
|
|
61
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial expenses
|
|
|
1,485
|
|
|
|
181
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial expenses, net
|
|
$
|
1,485
|
|
|
$
|
105
|
|
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 14:-
|
RELATED
PARTIES BALANCES AND TRANSACTIONS
|
|
a.
|
Balances
with interested and related parties:
|
|
|
|
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
Other accounts payable (1)
|
|
$
|
10
|
|
|
$
|
13
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans from controlling stockholder (2)
|
|
$
|
-
|
|
|
$
|
117
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible Loans (2)
|
|
$
|
965
|
|
|
$
|
-
|
|
|
b.
|
Transactions
with interested and related parties:
|
|
|
|
Year ended
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
Amounts charged to:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses (1)
|
|
$
|
87
|
|
|
$
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance expenses (2)
|
|
$
|
290
|
|
|
$
|
-
|
|
|
(1)
|
On
September 30, 2015, the shareholders meeting approved the Employment Agreement (“Agreement”)
of a relative to a controlling shareholder (“Relative”), as strategic consultant
to the Company through a company under the Relative’s control, effective as of April
29, 2015, and for a period of three years from the date of such approval. The services
will include strategic consulting in the field of business development in Israel and
abroad, raising funds and others.
|
The
consulting fees in accordance with the Agreement, shall be 25,000 NIS per month (approximately $7 according to the average exchange
rate during the years ended December 31, 2017 and 2016) which may be updated by up to 30%, subject to the opinion of the Company’s
Compensation Committee and the Company’s compliance with the goals set in the Agreement of the Relative.
|
(2)
|
See
also Note 8b and Note 9.
|
WIZE PHARMA INC. (FORMERLY: OPHTHALIX
INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 15:-
|
SUBSEQUENT
EVENTS
|
|
a
.
|
On
January 8, 2018, Wize Israel entered into a Memorandum of Understanding (“MOU”)
with Resdevco in connection with the License Agreement (see also Note 5), pursuant to
which, Resdevco granted to Wize Israel and its permitted assignees an exclusive royalty
bearing license to sell and distribute worldwide (excluding the Licensed Territories,
Switzerland, Germany and Netherlands, the “Additional Territories”), under
the LO2A licensed technology, products in the field of ophthalmic disorders, under the
terms and conditions set forth in the MOU, including the following: (i) the license for
each Additional Territory shall be conditional on signing a specific license agreement
for each Additional Territory that shall include the basic terms and conditions set forth
in the MOU, including reaching minimum sales targets in such Additional Territory pursuant
to a formula set forth in the MOU; (ii) for each Additional Territory, both Wize Israel
and the local distributor shall be responsible to pay Resdevco a minimum per product
fee in accordance with a formula set forth in the MOU and the agreement with the distributor
shall be subject to Resdevco’s prior approval (which shall not be unreasonably withheld);
(iii) if Resdevco introduces Wize Israel to a distributor in any Additional Territory,
Wize Israel will enter good faith negotiations with such distributor and, if Wize Israel
does not reach an agreement with such distributor, Resdevco may enter into a distribution
agreement with such distributor, in which case, Wize Israel will provide the services
it typically provides to its other distributors in consideration for a portion of the
royalties payable to Resdevco; and (iv) the license granted under the MOU is for an initial
term of 5 years and, thereafter, automatically renews for additional terms of 5 years
each, subject to full compliance with the terms set forth in the MOU and as long as the
License Agreement is in effect. The MOU also provides that it shall be in effect until
a definitive agreement reflecting the terms of the MOU is executed, which the parties
committed to exercise their best efforts to do within three months.
|
|
b
.
|
On
January 21, 2018, Resdevco provided a notice to Wize Israel and the Subsidiary agreeing
to postpone Wize Israel’s minimum royalty payment obligation of $150 with respect
to the United States pursuant to the License Agreement (the “2018 Payment”)
from January 1, 2018 to July 29, 2018, provided that Resdevco would be entitled to offset
any amounts owed by Resdevco to Wize Israel against the 2018 Payment.
|
WIZE PHARMA INC. (FORMERLY:
OPHTHALIX INC.) AND SUBSIDIARIES
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 15:-
|
SUBSEQUENT
EVENTS (Cont.)
|
|
c
.
|
On
February 6, 2018, the Company filed a Registration Statement on Form S-1 for the purpose
of registering (i) 2,218,794 shares Common Stock; (ii) 1,396,428 shares of Common Stock which are issuable upon conversion of 2016
Loan and 2017 Loan; (iii) 1,534,626 shares of Common Stock which are issuable upon the
exercise of certain investment rights granted by us to such selling stockholders and
(iv) 904,036 shares of Common Stock which are issuable upon exercise of warrants issued
by us to these selling stockholders.
|
|
d
.
|
On
February 22, 2018, the Company’s Board of Directors approved the adoption of the 2018
Stock Incentive Plan (the “2018 Plan”), including an Israeli annex to comply
with Israeli law, in particular the provisions of section 102 of the Israeli Income Tax
Ordinance. Under the 2018 Plan, the Company may grant its employees, directors, consultants
and/or contractors’ stock options, shares of Common Stock,
restricted stock and restricted stock units of the Company. The Board of Directors is
currently serving as the administrator of the 2018 Plan, although the 2018 Plan allows
for the administrator to be a committee of the Board of Directors appointed by the Board
of Directors for the purpose of the administration of the 2018 Plan. Each stock option
granted is exercisable, unless otherwise determined by the administrator, in twelve equal
installments over the three - year period from the date of grant. Unless otherwise determined
by the administrator, the term of each award will be seven years. The exercise price
per share subject to each option will be determined by the administrator, subject to
applicable laws and to guidelines adopted by the Board of Directors from time to time.
In the event the exercise price is not determined by the administrator, the exercise
price of an option will be equal to the closing stock price of the Common Stock on the
last trading day prior to the date of grant. Upon the adoption of the 2018 Plan, the
Company’s Board of Directors reserved for issuance 435,052 shares of Common Stock.
|
|
e.
|
On
February 28, 2018, the Company received notices from existing stockholders and lenders to exercise investment rights and
warrants to purchase an aggregate of 575,134 shares of Common Stock. As of March 26, 2018, the Company received the aggregate
exercise price of approximately $0.9 million and issued the underlying shares of Common Stock.
|
|
f.
|
On March 1, 2018, the Company filed a certificate of amendment (the “Amendment”) to its
Certificate of Incorporation with the Secretary of State of the State of Delaware in order to effectuate the Reverse Stock Split
(see also Note 12b).
|
WIZE PHARMA, INC. AND SUBSDIARIES
CONSOLIDATED
BALANCE SHEETS
U.S. dollars in thousands
|
|
As of
September 30,
|
|
|
As of
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
99
|
|
|
$
|
215
|
|
Restricted bank deposit
|
|
|
-
|
|
|
|
12
|
|
Marketable equity securities
|
|
|
34
|
|
|
|
323
|
|
Other current assets
|
|
|
147
|
|
|
|
40
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
280
|
|
|
|
590
|
|
|
|
|
|
|
|
|
|
|
NON-CURRENT ASSETS:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
6
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS
|
|
$
|
286
|
|
|
$
|
595
|
|
The accompanying notes are an integral
part of the unaudited interim consolidated financial statements (the “Q3 2018 Financial Statements”).
WIZE PHARMA, INC. AND SUBSDIARIES
CONSOLIDATED
BALANCE SHEETS
U.S. dollars in thousands (except share
and per share data)
|
|
As of
September 30,
|
|
|
As of
December 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
|
Audited
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES:
|
|
|
|
|
|
|
Trade payables
|
|
$
|
84
|
|
|
$
|
43
|
|
Other accounts payable
|
|
|
242
|
|
|
|
196
|
|
Current portion of license purchase obligation
|
|
|
250
|
|
|
|
250
|
|
Convertible loans, net
|
|
|
1,906
|
|
|
|
3,204
|
|
|
|
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
2,482
|
|
|
|
3,693
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STOCKHOLDERS’ DEFICIT:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, with $0.001 par value per share -
Authorized: 1,000,000 shares at September 30, 2018 and December 31, 2017; Issued and outstanding: 0 at September 30, 2018 and
December 31, 2017
|
|
|
-
|
|
|
|
-
|
|
Common Stock, with $0.001 par value per share -
500,000,000 shares authorized at September 30, 2018 and December 31, 2017; 5,362,550 and 4,350,608 shares issued and
outstanding at September 30, 2018 and December 31, 2017
|
|
|
5
|
|
|
|
4
|
|
Additional paid- in capital
|
|
|
25,786
|
|
|
|
23,397
|
|
Accumulated other comprehensive loss
|
|
|
(73
|
)
|
|
|
(47
|
)
|
Accumulated deficit
|
|
|
(27,914
|
)
|
|
|
(26,452
|
)
|
|
|
|
|
|
|
|
|
|
Total
Stockholders’ deficit
|
|
|
(2,196
|
)
|
|
|
(3,098
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
$
|
286
|
|
|
$
|
595
|
|
The accompanying notes are an integral
part of the Q3 2018 Financial Statements.
WIZE PHARMA, INC. AND SUBSDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE LOSS
U.S. dollars in thousands (except share
and per share data)
|
|
Nine months ended
September 30,
|
|
|
Three months ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
|
Unaudited
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
$
|
(521
|
)
|
|
$
|
(288
|
)
|
|
$
|
(222
|
)
|
|
$
|
(107
|
)
|
General and administrative expenses
|
|
|
(2,244
|
)
|
|
|
(760
|
)
|
|
|
(738
|
)
|
|
|
(229
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss
|
|
|
(2,765
|
)
|
|
|
(1,048
|
)
|
|
|
(960
|
)
|
|
|
(336
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income (expense), net
|
|
|
1,277
|
|
|
|
(1,016
|
)
|
|
|
445
|
|
|
|
(392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,488
|
)
|
|
$
|
(2,064
|
)
|
|
$
|
(515
|
)
|
|
$
|
(728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
-
|
|
|
|
(51
|
)
|
|
|
-
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss
|
|
|
-
|
|
|
|
(51
|
)
|
|
|
-
|
|
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(1,488
|
)
|
|
$
|
(2,115
|
)
|
|
$
|
(515
|
)
|
|
$
|
(698
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted net loss per share
|
|
$
|
(0.30
|
)
|
|
$
|
(0.64
|
)
|
|
$
|
(0.10
|
)
|
|
$
|
(0.2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares of common stock used in computing basic and diluted net loss per share
|
|
|
4,928,903
|
|
|
|
3,208,948
|
|
|
|
5,327,743
|
|
|
|
3,578,987
|
|
The accompanying notes are an integral
part of the Q3 2018 Financial Statements.
WIZE PHARMA, INC. AND SUBSDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
U.S. dollars in thousands (except share
data)
|
|
Ordinary Shares
|
|
|
Additional
paid-in
|
|
|
Treasury
|
|
|
Receipt on account of
stock
to be
|
|
|
Accumulated
other
comprehensive
|
|
|
Accumulated
|
|
|
Total
stockholders’
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
shares
|
|
|
issued
|
|
|
income (loss)
|
|
|
deficit
|
|
|
deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of January 1, 2017 (audited)
|
|
|
3,023,043
|
|
|
$
|
3
|
|
|
$
|
23,391
|
|
|
$
|
(747
|
)
|
|
|
-
|
|
|
$
|
5
|
|
|
$
|
(23,483
|
)
|
|
$
|
(831
|
)
|
Beneficial conversion feature in respect to convertible loan
|
|
|
-
|
|
|
|
-
|
|
|
|
811
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
811
|
|
Classification of derivative liability for right to future investment into equity
|
|
|
-
|
|
|
|
-
|
|
|
|
280
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
280
|
|
Issuance of units consisting of common stock and detachable warrants, net of issuance costs
|
|
|
860,987
|
|
|
|
1
|
|
|
|
965
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
966
|
|
Exercise of options into common stock
|
|
|
31,439
|
|
|
|
-
|
*)
|
|
|
21
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
21
|
|
Cancellation of treasury shares with respect to reverse recapitalization
|
|
|
-
|
|
|
|
-
|
|
|
|
(747
|
)
|
|
|
747
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Shares issued with respect to reverse recapitalization
|
|
|
435,139
|
|
|
|
-
|
*)
|
|
|
298
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
298
|
|
Amount that was allocated to the repurchase of
beneficial conversion feature in convertible loans
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,800
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,800
|
)
|
Amount that was allocated to the right for future investment - loan 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
44
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
44
|
|
Amount that was allocated to the right for future investment- loan 2017
|
|
|
-
|
|
|
|
-
|
|
|
|
1,115
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,115
|
|
Deemed dividend with respect to the repurchase of right for future investment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
(3
|
)
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(78
|
)
|
|
|
-
|
|
|
|
(78
|
)
|
Changes in unrealized gains on marketable equity securities
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
26
|
|
|
|
|
|
|
|
26
|
|
Net loss for the year
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,966
|
)
|
|
|
(2,966
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of December 31, 2017 (audited)
|
|
|
4,350,608
|
|
|
|
4
|
|
|
|
23,397
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(47
|
)
|
|
|
(26,452
|
)
|
|
|
(3,098
|
)
|
Cumulative effect adjustment as a result from transition to ASU 2016-01 (see note 2b)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(26
|
)
|
|
|
26
|
|
|
|
-
|
|
Issuance of shares with respect to exercise of PIPE Warrants and right for future investment (see note 6d)
|
|
|
788,658
|
|
|
|
1
|
|
|
|
1,144
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,145
|
|
Stock-based compensation
|
|
|
223,284
|
|
|
|
-
|
*)
|
|
|
1,245
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,245
|
|
Net loss for the interim period
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,488
|
)
|
|
|
(1,488
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance as of September 30, 2018 (unaudited)
|
|
|
5,362,550
|
|
|
$
|
5
|
|
|
$
|
25,786
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
(73
|
)
|
|
$
|
(27,914
|
)
|
|
$
|
(2,196
|
)
|
|
*)
|
Representing amount less than $1
|
The accompanying notes are an integral part of the
Q3
2018 Financial Statements.
WIZE PHARMA, INC. AND SUBSDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
|
|
Nine months ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(1,488
|
)
|
|
$
|
(2,064
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
1
|
|
|
|
*
|
)
|
Stock-based compensation
|
|
|
1,245
|
|
|
|
33
|
|
Change in fair value
of marketable equity securities
|
|
|
32
|
|
|
|
-
|
|
Amortization of discounts resulting from beneficial conversion feature and derivative liability and debt issuance costs related to convertible loans
|
|
|
-
|
|
|
|
729
|
|
Accrued interest on convertible loans
|
|
|
40
|
|
|
|
33
|
|
Amortization of premium related to convertible loans
|
|
|
(1,338
|
)
|
|
|
-
|
|
Change in the fair value of derivative liability for Right to Future Investment
|
|
|
-
|
|
|
|
246
|
|
Increase in license purchase obligation
|
|
|
150
|
|
|
|
-
|
|
Change in the fair value of license purchase obligation
|
|
|
-
|
|
|
|
1
|
|
Change in:
|
|
|
|
|
|
|
|
|
Other current assets
|
|
|
(100
|
)
|
|
|
(28
|
)
|
Account receivables
|
|
|
(7
|
)
|
|
|
-
|
|
Trade payables
|
|
|
41
|
|
|
|
30
|
|
Other accounts payable
|
|
|
46
|
|
|
|
37
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(1,378
|
)
|
|
|
(983
|
)
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of property and equipment
|
|
|
(2
|
)
|
|
|
(2
|
)
|
Proceeds from sale of marketable equity securities
|
|
|
257
|
|
|
|
-
|
|
Restricted bank deposit
|
|
|
12
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
267
|
|
|
|
(2
|
)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Proceeds from loans from controlling shareholder
|
|
|
-
|
|
|
|
82
|
|
Proceeds from issuance of convertible loan, net of issuance costs
|
|
|
-
|
|
|
|
620
|
|
Payment of license purchase obligation
|
|
|
(150
|
)
|
|
|
(154
|
)
|
Proceeds from issuance of shares with respect to exercise of PIPE Warrants and right for future investment
|
|
|
1,145
|
|
|
|
-
|
|
Proceeds from issuance of units consisting of ordinary shares and detachable warrants, net of issuance costs
|
|
|
-
|
|
|
|
963
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
995
|
|
|
|
1,511
|
|
Foreign currency translation adjustments on cash and cash equivalents
|
|
|
-
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
Increase in cash and cash equivalents
|
|
|
(116
|
)
|
|
|
544
|
|
Cash and cash equivalents at the beginning of the period
|
|
|
215
|
|
|
|
28
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
99
|
|
|
$
|
572
|
|
|
*)
|
Representing an amount of less than $1
|
(Continued)
WIZE PHARMA, INC. AND SUBSDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
U.S. dollars in thousands
(Continued)
|
|
Nine months ended
September 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
Unaudited
|
|
Supplemental disclosure of non-cash financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reclassification of derivative liability for Right to Future Investment into equity
|
|
$
|
-
|
|
|
$
|
280
|
|
|
|
|
|
|
|
|
|
|
Conversion of bridge loans from controlling shareholder to convertible loans
|
|
$
|
-
|
|
|
$
|
206
|
|
The accompanying notes are an integral part of the
Q3
2018 Financial Statements.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
a.
|
Wize Pharma, Inc. (formerly: OphthaliX Inc.) (the “Company” or “Wize”) was incorporated in the State of Delaware.
|
On November
16, 2017, the Company completed the acquisition of Wize Pharma Ltd., an Israeli company (“Wize Israel”) by way of a reverse
triangular merger.
Wize
Israel is a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including dry
eye syndrome (“DES”).
Commencing
August 30, 2016, Wize Israel manages most of its activity through OcuWize Ltd., a wholly-owned Israeli Subsidiary which manages
and develops most of the Company’s activity under the License Agreement.
In May 2015, Wize Israel entered into an Exclusive Distribution and Licensing Agreement (as amended, the
“License Agreement”) with Resdevco Ltd. (“Resdevco”), whereby Resdevco granted to Wize Israel an exclusive
license to purchase, market, sell and distribute a formula known as LO2A (“LO2A”) in the United States, Israel, Ukraine
and China as well as a contingent right to do the same in other countries. LO2A is a drug developed for the treatment of DES, and
other ophthalmological illnesses, including Conjunctivochalasis (“CCH”) and Sjögren’s syndrome (“Sjögren’s”).
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 the United States, 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 July 2018, the Company paid Resdevco royalties
in
the amount of $150.
Following
the Merger (as defined below) transaction as described in Note 1d, the business of Wize Israel became the ongoing business of the
Company and the Company is defined as a “smaller reporting company”, according to Item 10(f)(1) of Regulation S-K,
as promulgated by the United States Securities and Exchange Commission (the “SEC”).
See Note 8 below with respect to the private placement of the Company which closed in October 2018.
|
b.
|
Going concern uncertainty and management plans:
|
The Company has not yet generated any revenues from its current operations other than immaterial revenue
in Israel during the third quarter of 2018 of $7 which were deducted from research and development expenses, and therefore is dependent
upon external sources for financing its operations. As of September 30, 2018, the Company has an accumulated deficit of $27,914
and a stockholders’ deficit of $2,196.
In addition,
in the three and nine month periods ended September 30, 2018, and in the year ended December 31, 2017, the Company reported losses
and negative cash flows from operating activities. Management considered the significance of such conditions in relation
to the Company’s ability to meet its current and future obligations and determined that such conditions raise substantial doubt
about the Company’s ability to continue as a going concern.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
The accompanying Q3 2018 Financial Statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from
the possible inability of the Company to continue as a going concern.
Until
such time as the Company generates sufficient revenue to fund its operations (if ever), the Company plans to finance its operations
through the sale of equity or equity-linked securities and/or debt securities and, to the extent available, short-term and long-term
loans. There can be no assurance that the Company will succeed in obtaining the necessary financing to continue its operations
as a going concern.
As of September 30, 2018, the Company had an accumulated deficit of $27,914. The Company has historically
incurred net losses and is not able to determine whether or when it will become profitable, if ever. To date, the Company has not
commercialized any products or generated any revenues from product sales other than immaterial revenue in Israel during the third
quarter of 2018 of $7 which were deducted from research and development expenses and accordingly it does not have a revenue stream
to support its cost structure. The Company’s losses have resulted principally from costs incurred in development and discovery
activities.
The Company
expects to continue to incur losses for the foreseeable future, and these losses will likely increase as it:
|
●
|
initiates and manages pre-clinical development and
clinical trials for LO2A;
|
|
●
|
seeks regulatory approvals for LO2A;
|
|
●
|
implements internal systems and infrastructures;
|
|
●
|
seeks to license additional technologies to develop;
|
|
●
|
pays royalties related to the License Agreement;
|
|
●
|
hires management and other personnel; and
|
|
●
|
moves towards commercialization.
|
No certainty
exists that the Company will be able to complete the development of LO2A for CCH, Sjögren’s or any other ophthalmic disorder,
due to financial, technological or other difficulties. If LO2A fails in clinical trials or does not gain regulatory clearance or
approval, or if LO2A does not achieve market acceptance, the Company may never become profitable. Even if the Company does achieve
profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
The
Company’s inability to achieve and then maintain profitability would negatively affect its business, financial condition,
results of operations and cash flows.
Moreover,
the Company’s prospects must be considered in light of the risks and uncertainties encountered by an early-stage company
and in highly regulated and competitive markets, such as the biopharmaceutical market, where regulatory approval and market acceptance
of its products are uncertain. There can be no assurance that the Company’s efforts will ultimately be successful or result
in revenues or profits.
On May
21, 2017, the Company and a wholly-owned private Israeli subsidiary of the Company, Bufiduck Ltd. (“Merger Sub”), and
Wize Israel, entered into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which, among other
things, Merger Sub merged with and into Wize Israel, with Wize Israel becoming a wholly-owned subsidiary of the Company and the
surviving corporation of the merger (the “Merger”). On November 16, 2017, the Merger was closed (the “Closing
Date”).
On
the Closing Date, each issued and outstanding ordinary share of Wize Israel was automatically converted into
4.1445791236989 shares (the “Exchange Ratio”) (such number not being converted as per the Reverse Stock Split
described in Note 6b) of the Company’s common stock, par value $0.001 per share (the “Common Stock”). As a result,
an aggregate of 3,915,469 shares, or 90% of the issued and outstanding Common Stock were issued to Wize Israel’s shareholders.
The pre-Merger stockholders of the Company retained an aggregate of 435,052 shares, or 10% of the issued and outstanding Common
Stock.
Wize
Israel’s ordinary shares were delisted from the Tel Aviv Stock Exchange and there is no longer a public trading market for Wize
Israel’s ordinary shares in Israel.
The
Merger between the Company and Wize Israel became effective on November 16, 2017, and following such Merger, Wize Israel activities
are the sole activities of the Company. The Common Stock is currently quoted on the OTCQB under the symbol “WIZP.”
The Merger
was accounted for as a reverse recapitalization which is outside the scope ASC 805, “Business Combinations” (“ASC
805”), as the Company, the legal acquirer, was considered a non-operating public shell, and is therefore not a business as
defined in ASC 805. Under reverse capitalization accounting, Wize Israel was considered the acquirer for accounting and
financial reporting purposes. The Merger was accounted for in a manner that is substantially the same as a reverse acquisition
under ASC 805, except that any excess fair value of the consideration transferred over the net fair value of the monetary assets
of the Company was recognized as a reduction of equity.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
The Financial
Statements reflect the operations of the acquirer for accounting purposes together with a deemed issuance of shares, equivalent
to the shares held by the former stockholders of the legal acquirer and a recapitalization at the equity of the accounting acquirer.
The interim
consolidated financial statements include the accounts of the Company since the Closing Date and
the accounts of Wize Israel since its inception. See Note 3 for discussion of the basis of presentation for the Financial Statements.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
|
The Financial
Statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
|
a.
|
Use of estimates in preparation of the Financial Statements:
|
The preparation
of the Financial Statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions
that affect the amounts reported in the Financial Statements and accompanying notes. The Company evaluates on an ongoing basis
its assumptions. The Company’s management believes that the estimates, judgments and assumptions used are reasonable based upon
information available at the time they are made.
These estimates,
judgments and assumptions can affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities
at the dates of the Financial Statements, and the reported amounts of expenses during the reporting periods. Actual results could
differ from those estimates.
As applicable
to the consolidated financial statements, the most significant estimates and assumptions relate to the going concern assumptions
and determining the fair value of embedded and freestanding financial instruments related to convertible loans and to stock- based
compensation.
The significant
accounting policies applied in the annual consolidated financial statements of the Company as of December 31, 2017 are applied
consistently in these Financial Statements, except as described in b below.
|
b.
|
Recently Issued Accounting Pronouncements
|
ASU 2014-09, “Revenue
from Contracts with Customers (Topic 606)”
Commencing January 1, 2018 the
Company adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”).
ASU 2014-09 outlines a single comprehensive
model to use in accounting for revenue arising from contracts with customers and supersedes most current revenue recognition guidance,
including industry-specific guidance. ASU 2014-09 also requires entities to disclose sufficient information, both quantitative
and qualitative, to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and
cash flows arising from contracts with customers.
An entity should apply the amendments
in ASU 2014-09 using one of the following two methods: 1. Retrospectively to each prior reporting period presented with a possibility
to elect certain practical expedients, or, 2. Retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized
at the date of initial application. If an entity elects the latter transition method, it also should provide certain additional
disclosures.
In accordance with an amendment
to ASU 2014-09, the new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim
periods within that reporting period (the first quarter of fiscal year 2018 for the Company).
Since the company did not report
significant revenues, the adoption of ASU 2014-09 did not have a significant impact on its consolidated financial statements.
ASU 2016-01, “Financial
Instruments—Overall (Topic 825-10): “Recognition and Measurement of Financial Assets and Financial Liabilities.”
Commencing
January 2018, the Company applied ASU 2016-01, “Financial Instruments—Overall (Topic 825-10): “Recognition and
Measurement of Financial Assets and Financial Liabilities.” (ASU 2016-01).
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
ASU 2016-01
amends the guidance on the classification and measurement of financial instruments. Among others, ASU 2016-01 requires
that equity investments (except those accounted for under the equity method of accounting or those that result in consolidation
of the investee) will be measured at fair value with changes in fair value recognized in net income. Also, ASU 2016-01, simplifies
the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment
to identify impairment and requires a public business entities to use the exit price notion when measuring the fair value
of financial instruments for disclosure purposes.
ASU 2016-01,
requires an entity to present separately in other comprehensive income the portion of the total change in the fair value of a liability
resulting from a change in the instrument-specific credit risk when the entity has elected to measure a liability at fair value
in accordance with the fair value option for financial instruments. ASU 2016-01 also requires separate presentation of financial
assets and financial liabilities by measurement category and form of financial asset (that is, securities or loans and receivables)
on the balance sheet or in the accompanying notes to the financial statements.
For public
business entities, the amendments of ASU 2016-01 became effective for fiscal years beginning after December 15, 2017,
including interim periods within those fiscal years.
ASU 2016-01
requires that its amendment will be applied using a cumulative-effect adjustment to the balance sheet as of the beginning of the
fiscal year of adoption. However, the amendments related to equity securities without readily determinable fair values (including
disclosure requirements) should be applied prospectively to equity investments that exist as of the date of adoption of the Update.
Following
the adoption of ASU 2016-01, the Company reclassified unrealized gains and losses amounts related to its investment in marketable
equity securities that previously were classified as available-for-sale securities from accumulated other comprehensive income
to accumulated deficit. Following the adoption, such investment is accounted for at fair value and the changes in fair value are
recognized in net income or loss.
Accounting Standard Update
2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting
In June 2018,
the FASB issued Accounting Standard Update 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee
Share-Based Payment Accounting (ASU 2018-07). ASU 2018-07 aligns the measurement and classification guidance for share-based payments
to nonemployees with the guidance for share-based payments to employees, with certain exceptions.
Consistent
with the accounting requirement for employee share-based payment awards, nonemployee share-based payment awards within the scope
of Topic 718 will be measured at grant-date fair value of the equity instruments that an entity is obligated to issue when the
goods has been delivered or the service has been rendered and any other conditions necessary to earn the right to benefit from
the instruments have been satisfied.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
Equity-classified
nonemployee share-based payment awards will be measured at the grant date (the date at which a grantor and a grantee reach a mutual
understanding of the key terms and conditions of a share-based payment award). With respect to awards with performance conditions,
ASU 2018-07 concludes that, consistent with the accounting for employee share-based payment awards, an entity will consider the
probability of satisfying performance conditions when nonemployee share-based payment awards contain such conditions.
ASU 2018-07
also requires that the classification of equity classified nonemployee share-based payment awards will continue to be subject to
the requirements of Topic 718 unless the award was modified after the goods has been delivered, the service has been rendered,
any other conditions necessary to earn the right to benefit from the instruments have been satisfied, and the nonemployee is no
longer providing goods or services. This eliminates the requirement to reassess classification of such awards upon vesting.
In addition, ASU 2018-07 includes certain
non-public
entity-specific amendments.
ASU 2018-07 is effective for
public
entities in annual periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted,
including in an interim period, but not before an entity adopts the new revenue recognition guidance (which became effective for
the Company and adopted with no significant effect, in its interim financial statements for 2018).
An entity
should only remeasure liability-classified awards that have not been settled by the date of adoption and equity-classified awards
for which a measurement date has not been established, through a cumulative-effect adjustment to retained earnings as of the beginning
of the fiscal year of adoption. Upon transition, the entity is required to measure these nonemployee awards at fair value as of
the adoption date.
The Company has elected to early apply ASU 2018-07 in its interim financial statements for the interim
period ended September 2018. However, as there are no liability-classified awards and as there were no equity-classified awards
for which a measurement date has not been established as of January 1, 2018 (the beginning of the fiscal year of adoption), the
adoption did not have significant effect on the financial statements. Also, as a result of the adoption all equity-classified nonemployee
share-based payment awards granted during 2018 were measured at grant-date fair value of the equity instruments that the
Company
is obligated to issue.
|
NOTE 3:-
|
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
|
The accompanying Financial Statements have been prepared in accordance with accounting principles generally
accepted in the United States for interim financial information, and as discussed in Note 1d, include the accounts of Wize Israel
since its inception, and the accounts of the Company since the Closing Date
.
Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the
United States for complete financial statements.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 3:-
|
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Cont.)
|
In the opinion of management,
all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating
results for the nine-month period ended September 30, 2018 are not necessarily indicative of the results that may be expected
for the year ending December 31, 2018 or for any other interim period.
The accompanying Financial Statements
and related notes should be read in conjunction with the consolidated financial statements and related notes for the fiscal year
ended December 31, 2017, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 as filed
with the SEC on March 29, 2018 and amended on June 5, 2018. The accompanying consolidated balance sheet as of December 31, 2017,
and the accompanying consolidated statements of changes in stockholders’ deficit for the year then ended has been derived
from those audited financial statements.
|
NOTE 4:-
|
CONTINGENT LIABILITIES AND COMMITMENTS
|
On March 28, 2018, the Company
signed an agreement to rent an office from an unrelated third party. The rental period is two years from April 1, 2018, with an
option for additional one year. The rental fees amounted to $1 per month plus participation in office usage expenses.
The Company has additional commitments, as described in note 11b to the Company’s consolidated financial
statements and related notes for the fiscal year ended December 31, 2017, included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2017 as filed with the SEC on March 29, 2018 and amended on June 5, 2018.
|
NOTE 5:-
|
CONVERTIBLE LOANS
|
On March 20, 2016, Wize Israel
entered into an agreement (as amended on March 30, 2016, the “2016 Loan Agreement”) pursuant to which Rimon Gold Assets
Ltd. (“Rimon Gold”) extended a loan in the principal amount of up to NIS 2 million (approximately $531 according to
an exchange rate on March 20, 2016, the loan origination date), which bears interest at an annual rate of 4% (the “2016 Loan”).
Pursuant to the 2016 Loan Agreement, as modified by the 2017 Loan Agreement (as defined below) and the 2017 Loan Amendment (as
defined below), the 2016 Loan had a maturity date of December 31, 2018. See Note 8 with respect to the modification of the maturity
date of the 2016 Loan subsequent to September 30, 2018.
Under the 2016 Loan Agreement, Rimon Gold had the right, at its sole discretion, to convert any outstanding
portion of the 2016 Loan, but not less than NIS 100,000 (approximately $26
according
to an exchange rate on March 20, 2016, the loan origination date), into Wize Israel ordinary shares at a conversion price per share
of NIS 15.2592 (approximately $3.84), subject to adjustments for stock splits and similar events set forth in the 2016 Loan Agreement.
As a result of the Merger and based on the Exchange Ratio, the conversion price per share for the 2016 Loan was adjusted to NIS
3.6 (approximately $0.96). As a result of the 2017 Loan Amendment (as defined below), the aggregate principal amount of the 2016
Loan is $531 and the conversion price per share for the 2016 Loan was adjusted to $0.9768.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 5:-
|
CONVERTIBLE LOANS (Cont.)
|
In addition, under the 2016
Loan Agreement, as modified by the 2017 Loan Agreement (as defined below) and the 2017 Loan Amendment (as defined below), Rimon
Gold has the right (the “2016 Investment Right”), until June 30, 2019, to invest up to $797 , in the aggregate, at
an agreed price per share, which was adjusted based on the Exchange Ratio from NIS 20.4 (approximately $6.00) to NIS 5.04 (approximately
$1.44) and based on the 2017 Loan Amendment (as defined below), from NIS 5.04 to $1.308 (subject to adjustments in case of stock
splits or similar events). See Note 8 with respect to the modification of the maturity date of the 2016 loan subsequent to September
30, 2018.
On January 15, 2017, Wize Israel
entered into the loan agreement (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,”
and together with Ridge and Rimon Gold, the “2017 Lenders”), whereby each of the lenders extended a loan in the principal
amount of up to NIS 1 million (approximately $274 according to an exchange rate on January 17, 2017, the loan origination date)
and in the aggregate principal amount of up to NIS 3 million (approximately $822 according to an exchange rate on January 17, 2017,
the loan origination date), which bears interest at an annual rate of 4% (the “2017 Loan”, and together with the 2016
Loan, the “Loans”). Pursuant to the 2017 Loan Agreement and the 2017 Loan Amendment (as defined below), the 2017 Loan
has a maturity date of December 31, 2018. See Note 8 with respect to the modification of the maturity date of the 2016 loan subsequent
to September 30, 2018.
Under the 2017 Loan Agreement,
each of the 2017 Lenders had the right, at its sole discretion, to convert any outstanding portion of the 2017 Loan, but no less
than NIS 100,000 (approximately $28 according to an exchange rate on January 17, 2017, the loan origination date), that the lender
provided to Wize Israel (each such portion converted into Wize Israel ordinary shares at a conversion price per share equal to
the lower of (1) NIS 24 (approximately $6.72) and (2) the lowest price per share of Wize Israel in any offering made by Wize Israel
following the date of the 2017 Loan Agreement and through the date of such requested conversion, subject to adjustments for stock
splits and similar events set forth in the 2017 Loan Agreement (the “2017 Loan Conversion Price”). As a result of the
2017 PIPE, the 2017 Loan Conversion Price for Rimon Gold, Fisher and Ridge was adjusted to NIS 16.8 (approximately $4.80), and
as a result of the Merger, the 2017 Loan Conversion Price of NIS16.8 (approximately $4.8) was adjusted in accordance with the Exchange
Ratio to NIS 4.05 (approximately $1.15). As a result of the 2017 Loan Amendment (as defined below), the aggregate principal amount
of the 2017 Loan is $822 and the 2017 Loan Conversion Price was adjusted to $1.1112. See “2017 Loan Amendment” below.
In addition, under the 2017
Loan Agreement, as modified by the 2017 Loan Amendment (as defined below), the 2017 Lenders have the right (the “2017 Investment
Right”), until June 30, 2019, to invest up to $1,233, in the aggregate, at an agreed price per share equal to 120% of the
applicable 2017 Loan Conversion Price, which was adjusted in December 2017, based on the 2017 Loan Amendment, to a fixed exercise
price of $1.332 (subject to adjustments in case of stock splits or similar events). See Note 8 with respect to the modification
of the maturity date of the 2016 loan subsequent to
September 30, 2018.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 5:-
|
CONVERTIBLE LOANS (Cont.)
|
On December 21, 2017, the Company
entered into an amendment (the “2017 Loan Amendment”) to the 2016 Loan Agreement and the 2017 Loan Agreement. Pursuant
to the 2017 Loan Amendment, (i) the maturity date of the Loans was extended from December 31, 2017 to December 31, 2018; (ii)
the exercise period of the 2016 Investment Right was amended so that it shall expire on June 30, 2019; (iii) the exercise period
of the 2017 Investment Right was amended so that it shall expire, without the need to first convert the 2017 Loan, on June 30,
2019; and (iv) the below terms of the Loans were amended to be denominated in U.S. dollars instead of NIS:
|
|
|
2017
Loan
|
|
|
2016
Loan
|
|
|
|
|
|
|
|
|
|
|
Aggregate principal amount
|
|
$
|
822
|
(*)
|
|
$
|
531
|
|
|
|
|
|
|
|
|
|
|
|
|
Conversion price per Company’s share
|
|
$
|
1.1112
|
|
|
$
|
0.9768
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate maximum of Right to Future Investment
|
|
$
|
1,233
|
(**)
|
|
$
|
797
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise Price of Right to Future Investment
|
|
$
|
1.332
|
|
|
$
|
1.308
|
|
|
(*)
|
Principal loan amount of $274 for each of the three 2017
Lenders.
|
|
(**)
|
Maximum of Right to Future Investment of $411 for each
of the three 2017 Lenders.
|
The
below table describes the roll forward of 2017 Loan and 2016 Loan for the nine months ended September 30, 2018 and the year ended
December 31, 2017:
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
Opening balance
|
|
$
|
3,204
|
|
|
$
|
289
|
|
|
Proceeds from issuance of convertible loan, net of issuance cost
|
|
|
-
|
|
|
|
811
|
|
|
Recognition of BCF as a discount of 2017 Loan
|
|
|
-
|
|
|
|
(811
|
)
|
|
Amortization of premium related to convertible loans
|
|
|
(1,338
|
)(*)
|
|
|
-
|
|
|
Amortization of discounts resulting from BCF and derivative liability and debt issuance costs related to 2017 Loan and 2016 Loan
|
|
|
-
|
|
|
|
1,122
|
|
|
Accrued interest on 2017 Loan and 2016 Loan
|
|
|
40
|
|
|
|
47
|
|
|
Derecognition of carrying amount of 2016 Loan and 2017 Loan upon extinguishment
|
|
|
-
|
|
|
|
(1,458
|
)
|
|
Amount allocated to 2016 and 2017 Loan based on modified terms
|
|
|
-
|
|
|
|
3,204
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,906
|
|
|
$
|
3,204
|
|
|
(*)
|
The amortization of premium represents the periodic amortization of the balance of the amount that was
allocated to the 2016 and 2017 Loans upon the 2017 Loan amendment into the respective principal amount of such loans.
|
See Note 8 with respect to the
modifications to the convertible loan agreements
subsequent to September
30, 2018.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 6:-
|
STOCKHOLDERS’ DEFICIT
|
|
a.
|
The Common Stock confers upon their holders the right
to participate and vote in general shareholder meetings of the Company and to share in the distribution of dividends, if any,
declared by the Company, and rights to receive a distribution of assets upon liquidation.
|
|
b.
|
On December 11, 2017, the Company announced a notice of
special meeting of stockholders, according to which, a special meeting of the stockholders was held on February 19, 2018, for
the purpose of considering to grant the Company’s Board of Directors the authority, in its sole direction, to approve an
amendment to the Company’s Certificate of Incorporation to effect a reverse stock split of the Company’s issued and
outstanding Common Stock by a ratio of not less than 1-for-10 and not more than 1-for-200.
|
|
c.
|
On February 19, 2018, the stockholders of the Company approved
a reverse stock split of the Company’s issued and outstanding Common Stock by a ratio of not less than 1-for-10 and not
more than 1-for-200 at any time prior to February 19, 2019, with such ratio to be determined by the Company’s Board of Directors,
in its sole discretion. On February 22, 2018, the Company’s Board of Directors approved a reverse stock split of the Company’s
issued and outstanding Common Stock by a ratio of 1-for-24 (“Reverse Stock Split”).
|
For accounting
purposes, all share and per share amounts for Common Stock, warrants stock, options stock and loss per share amounts have been
adjusted to give retroactive effect to the Reverse Stock Split (see also Note 1d) for all periods presented in these Financial
Statements. Any fractional shares that resulted from the Reverse Stock Split have been rounded up to the nearest whole share.
|
d.
|
On February 28, 2018, the Company received notices from
existing stockholders and lenders to exercise 2016 Investment Right and 2017 Investment Rights and warrants issued in a private
placement of Wize Israel that was completed in July and August 2017 (the “PIPE Warrants”) to purchase an aggregate
of 788,658 shares of Common Stock. During the nine months ended September 30, 2018, the Company received the aggregate exercise
price of approximately $1,148 and issued 788,658 shares of Common Stock as follows:
|
|
1.
|
144,168 PIPE Warrants were exercised into 144,168 shares of common stock by certain stockholder. The aggregate
exercise price amounted to approximately $293 was received in cash. As of September 30, 2018, 759,869 PIPE Warrants remain outstanding.
|
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 6:-
|
STOCKHOLDERS’ DEFICIT (Cont.)
|
|
2.
|
Certain holders of 2016 Investment Rights and 2017 Investment Rights exercised a portion of such rights
and invested, in the aggregate, $854 for 217,442 and 427,048 respectively, shares of Common stock at an exercise price per share
of $1.308 and $1.332 per share, respectively. As of September 30, 2018, the remaining 2016 Investment Rights and 2017 Investment
Rights amount to approximately $765.
|
|
e.
|
In April and June 2018, the Company issued 24,306 shares of Common Stock to two of its service providers
in exchange for their services provided in 2018. The Company recognized an amount of $110 in its interim financial statements for
the nine month period ended September 30, 2018 and an amount of approximately $15 will be recognized until the end of 2018.
|
|
f.
|
On May 10, 2018, the Company filed an amendment to the S-1 Registration Statement, for the purpose of
registering (i) 922,330 shares of Common Stock that were outstanding as of that date; and (ii) 338,945 shares of Common Stock which
are issuable upon conversion of the 2016 Loan and/or the 2017 Loan. The S-1 Registration Statement was declared effective by the
SEC on July 12, 2018.
|
|
g.
|
In July 2018, the Company issued 67,778 shares of Common
Stock to certain service providers in exchange for their services provided in 2018. The Company recognized an amount of $381 in
its interim financial statements for the nine month period ended September 30, 2018.
|
|
h.
|
Stock-based compensation:
|
The 2012
Plan
In 2012,
the Company’s Board of Directors approved the adoption of the 2012 Stock Incentive Plan (the “2012 Plan”).
An Israeli
annex was subsequently adopted in 2013 to comply with the requirements set by the Israeli law in general and in particular with
the provisions of section 102 of the Israeli tax ordinance. Under the 2012 Plan and Israeli annex, the Company may grant its officers,
directors, employees and consultants, stock options, restricted stocks and Restricted Stock Units (“RSUs”) of the Company.
Each Stock option granted shall be exercisable at such times and terms and conditions as the Company’s Board of Directors may specify
in the applicable option agreement, provided that no option will be granted with a term in excess of 10 years. Upon the adoption
of the 2012 Plan, the Company reserved for issuance 45,370 shares of Common Stock, $0.001 par value each.
As of September
30, 2018, the Company has 40,474 shares of Common Stock available for future grant under the 2012 Plan. As of September 30, 2018,
under the 2012 Plan, the Company had options exercisable into 4,896 shares of Common Stock outstanding and exercisable.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 6:-
|
STOCKHOLDERS’ DEFICIT (Cont.)
|
The 2018
Plan
On February
22, 2018, the Company’s Board of Directors approved the adoption of the 2018 Stock Incentive Plan (the “2018 Plan”),
including an Israeli annex to comply with Israeli law, in particular the provisions of section 102 of the Israeli Income Tax Ordinance.
Under the
2018 Plan, the Company may grant its employees, directors, consultants and/or contractors’ stock options, shares of Common Stock,
restricted stock and restricted stock units of the Company. The Compensation Committee of the Board of Directors is currently serving
as the administrator of the 2018 Plan. Each stock option granted is exercisable, unless otherwise determined by the administrator,
in twelve equal installments over the three - year period from the date of grant. Unless otherwise determined by the administrator,
the term of each award will be seven years.
The exercise price per share subject
to each option will be determined by the administrator, subject to applicable laws and to guidelines adopted by the Board of Directors
from time to time. In the event the exercise price is not determined by the administrator, the exercise price of an option will
be equal to the closing stock price of the Common Stock on the last trading day prior to the date of grant. Upon the adoption of
the 2018 Plan, the Company’s Board of Directors reserved for issuance 2,500,000 shares of Common Stock. Through September
30, 2018, the Company granted 255,000 options to directors, officers and a consultant see also Note 6k and Note 6l.
|
i.
|
On March 1, 2018, the Company filed
a certificate of amendment to its Certificate of Incorporation with the Secretary of State of the State of Delaware in order to
effectuate the Reverse Stock Split (see also Note 6b).
|
|
j.
|
On April 4, 2018, the Company granted to its officers, directors and a consultant, 131,200 fully vested
RSUs. The Company determined the fair value of the RSUs to be the quoted market price of the Company’s common stock units
on the date of issuance. The aggregate fair value of these restricted stock units issued was $471, and was recognized during the
three month period ended June 30, 2018.
|
|
k.
|
On April 4, 2018, the Company granted to its officers,
directors and a consultant options exercisable into 229,500 shares of Common Stock and have exercise price of $3.59 per stock.
The options will vest quarterly over a period of 36 months. The Company recognized $260 during the nine months period ended September
30, 2018.
|
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 6:-
|
STOCKHOLDERS’ DEFICIT (Cont.)
|
|
l.
|
On August 15, 2018, the Company granted to its consultant options exercisable into 25,500 shares of Common
Stock at an exercise price of $4.50 per share of Common stock. The options will vest quarterly over a period of 36 months.
|
Transactions related to the grant
of fully vested RSUs to officers, directors and a consultant during the period ended September 30, 2018, were as follows:
|
|
|
September 30,
|
|
|
|
|
2018
|
|
|
|
|
|
|
|
Opening balance
|
|
|
-
|
|
|
Granted
|
|
|
131,200
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2018
|
|
|
131,200
|
|
Transactions
related to the grant of options to employees and directors under the 2012 Plan during the period ended September 30, 2018,
were as follows:
|
|
|
As of September 30, 2018
|
|
|
|
|
Number of options
|
|
|
Weighted average exercise price
|
|
|
Weighted average remaining
contractual life (in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding as of December 31, 2017
|
|
|
4,896
|
|
|
$
|
190.8
|
|
|
|
4.86
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding and exercisable as of September 30, 2018
|
|
|
4,896
|
|
|
$
|
190.8
|
|
|
|
4.11
|
|
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 6:-
|
STOCKHOLDERS’ DEFICIT (Cont.)
|
Transactions
related to the grant of options to employees and directors under the 2018 Plan during the period ended September 30, 2018,
were as follows:
|
|
|
As of September 30, 2018
|
|
|
|
|
Number of options
|
|
|
Weighted average exercise price
|
|
|
Weighted average remaining contractual life (in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding as of December 31, 2017
|
|
|
-
|
|
|
$
|
-
|
|
|
|
-
|
|
|
Granted
|
|
|
255,000
|
|
|
$
|
3.68
|
|
|
|
6.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding as of September 30, 2018
|
|
|
255,000
|
|
|
$
|
3.68
|
|
|
|
6.55
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable as of September 30, 2018
|
|
|
19,125
|
|
|
$
|
3.59
|
|
|
|
6.5
|
|
At September
30, 2018, there was $351 of total unrecognized compensation cost related to non-vested option grants that is expected to be recognized
over a weighted-average period of 2.5 years. The intrinsic value of options outstanding and exercisable at September 30, 2018 was
not significant.
The Company uses the Black-Scholes
option-pricing model to estimate fair value of grants of stock options. With respect to grants of options, the risk-free rate of
interest was based on the U.S. Treasury rates appropriate for the contractual term of the grant, expected volatility was calculated
based on average volatility of the Company and five representative companies and expected term of stock-based grants of 3.63-5
years.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 7:-
|
FINANCIAL INCOME (EXPENSE), NET
|
Composition:
|
|
|
Nine months ended
September 30,
|
|
|
Three months ended
September 30,
|
|
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exchange rate differences
|
|
$
|
15
|
|
|
$
|
-
|
|
|
$
|
18
|
|
|
$
|
-
|
|
|
Amortization of premium related to convertible loans
|
|
|
1,338
|
|
|
|
-
|
|
|
|
446
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total finance income
|
|
|
1,353
|
|
|
|
-
|
|
|
|
464
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued interest on convertible loans
|
|
|
(40
|
)
|
|
|
(33
|
)
|
|
|
(13
|
)
|
|
|
(14
|
)
|
|
Amortization of BCF, proceeds allocated to the derivative liability and debt issuance costs for convertible loans
|
|
|
-
|
|
|
|
(729
|
)
|
|
|
-
|
|
|
|
(368
|
)
|
|
Change in the fair value of derivative liability for Right to Future Investment
|
|
|
-
|
|
|
|
(246
|
)
|
|
|
-
|
|
|
|
-
|
|
|
Amortization of discount and exchange rate differences on license purchase obligation
|
|
|
-
|
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
(5
|
)
|
|
Change in fair value of marketable equity securities
|
|
|
(32
|
)
|
|
|
-
|
|
|
|
(4
|
)
|
|
|
-
|
|
|
Bank commissions
|
|
|
(4
|
)
|
|
|
(7
|
)
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial expenses
|
|
|
(76
|
)
|
|
|
(1,016
|
)
|
|
|
(19
|
)
|
|
|
(392
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total financial income (expense), net
|
|
$
|
1,277
|
|
|
$
|
(1,016
|
)
|
|
$
|
445
|
|
|
$
|
(392
|
)
|
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 8:-
|
SUBSEQUENT EVENTS
|
On October
22, 2018, The Company entered into a securities purchase agreement (the “Purchase Agreement”). Pursuant to the Purchase
Agreement, the Company agreed to sell to the investors, and the investors agreed to purchase from the Company, in a private placement,
an aggregate of (i) 3,100,000 shares of common stock, for a purchase price of $1.00 per share, and (ii) 1,350 shares of newly created
Series A Preferred Stock (each convertible into 1,000 shares of common stock), for a purchase price of $1,000 per share, for aggregate
gross proceeds under the Purchase Agreement of $4,450. The Company also agreed to issue to the investors Series A warrants (the
“Series A Warrants”) to purchase an aggregate of 4,450,000 shares of common stock (equal to 100% of the shares of common
stock sold (on an as-converted basis with respect to shares of Series A Preferred Stock)), and Series B warrants (the “Series
B Warrants, and together with the Series A Warrants, the “Warrants”), to purchase an aggregate of 4,450,000 shares
of common stock (equal to 100% of the shares of common stock sold (on an as-converted basis with respect to shares of Series A
Preferred Stock)). The Series A Warrants will have an exercise price of $1.10 per share, and the Series B Warrants will have an
exercise price of $1.00 per share. The investors under the Purchase Agreement include prior investors in the Company and a lender
to the Company.
The Series
A Warrants, when issued, will have a term of 5 years from issuance, and the Series B Warrants will have a term that expires 20
days following the later of (i) the public announcement of Phase II clinical data for LO2A and (ii) six months following the issuance
date, provided that, for each day after the issuance date that an Equity Conditions Failure (as defined in the Series B Warrants)
has occurred, the expiration date of the Series B Warrants will be extended by one day.
In the event
that, during the period commencing upon execution of the Purchase Agreement, and expiring on the trading day immediately following
the date that the Company has raised, beginning after the issuance date of the Warrants, at least $10 million in gross proceeds
from the issuance of the Company’s securities, the Company issues or sells common stock (or securities convertible into or
exercisable into common stock) at a purchase price (or conversion or exercise price, as applicable) lower than the exercise price
of the Warrants, than the exercise price of the Warrants will be reduced to such lower price, subject to certain exceptions.
Pursuant to
the Purchase Agreement, the Company granted to the investors thereunder, for a period of three years from the closing date of the
Purchase Agreement, a right of participation of up to an aggregate of 35% in any subsequent offering of the Company, subject to
certain exceptions.
The Warrants
will be exercisable on a cashless basis in the event that, six months after the closing of the Purchase Agreement, there is not
an effective registration statement for the resale of the shares underlying the Warrants. The Warrants may not be exercised to
the extent such exercise would cause the holder to beneficially own more than 4.99% (or 9.99%, at the election of the investor)
of the Company’s outstanding common stock.
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 8:-
|
SUBSEQUENT EVENTS (Cont.)
|
Pursuant to
the Purchase Agreement, the Company agreed that it will not, for a period commencing upon the closing of the Purchase Agreement,
until the earlier of (i) 150 days following the date that all of the common stock, issued pursuant to the Purchase Agreement, and
issuable upon conversion of the Series A Preferred Stock and exercise of the Warrants, are registered for resale, (ii) six months
after the date that a non-affiliate investor under the Purchase Agreement may first sell securities purchased thereunder under
Rule 144, (iii) 120 days following the listing of the common stock on a Qualified Market (as defined below) and (iv) the first
trading day that the weighted average price of the common stock exceeds $5.00 per share for 10 consecutive trading days occurring
after the date that a registration statement covering the resale of all of the common stock, issued pursuant to the Purchase Agreement,
and issuable upon conversion of the Series A Preferred Stock and exercise of the Warrants, are registered for resale, offer or
sell any common stock (or securities convertible into or exercisable into common stock), or file any registration statement, other
than pursuant to the Registration Rights Agreement or on Form S-8, subject to certain exceptions.
In connection
with the Purchase Agreement, on October 22, 2018, the Company filed a Certificate of Designations of Series A Preferred Stock (the
“Series A Certificate of Designations”) with the Secretary of State of Delaware. Pursuant to the Series A Certificate
of Designations, the Company designated 1,350 shares of preferred stock as Series A Preferred Stock. The Series A Preferred Stock
has a stated value of $1,000 per share and is convertible into shares of common stock in an amount determined by dividing the stated
value of $1,000 by the conversion price of $1.00, such that each share of Series A Preferred Stock is convertible into 1,000 shares
of common stock. The Series A Preferred Stock may not be converted into common stock to the extent such conversion would cause
the holder to beneficially own more than 4.99% (or 9.99%, at the election of the investor) of the Company’s outstanding common
stock. The Series A Preferred Stock is entitled to dividends on an as-converted basis with the common stock. The Series A Preferred
Stock votes with the common stock on an as-converted basis, subject to the beneficial ownership limitation.
The Company
will be obligated to pay liquidated damages to the investors if the Company fails to file the resale registration statement when
required, fails to cause the Registration Statement to be declared effective by the SEC when required, fails to maintain the Registration
Statement and upon the occurrence of certain other events. The Company shall pay to each investor cash equal to 2% of such investor’s
total purchase price on the dates of each deficiency and on the 30
th
day after such deficiencies until such deficiencies
are cured, up to a maximum of 10% of the purchase price.
The Company engaged ThinkEquity,
a division of Fordham Financial Management, Inc. (“ThinkEquity”), as the placement agent for the private placement,
pursuant to a placement agency agreement between the Company and ThinkEquity (the “Placement Agency Agreement”). The
Company will pay ThinkEquity a fee equal to 8% of the gross proceeds, excluding proceeds received from certain investors for its
services as placement agent, and will issue to ThinkEquity or its designees warrants to purchase 267,000 shares of common stock
(equal to 6% of the shares of common stock sold (on an as-converted basis with respect to shares of Series A Preferred Stock)).
WIZE PHARMA, INC. AND SUBSDIARIES
NOTES
TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share
and per share data
|
NOTE 8:-
|
SUBSEQUENT EVENTS (Cont.)
|
Such warrants
will have an exercise price of $1.00 per share and will otherwise have the same terms as the Series A Warrants issued to the investors.
The Company will also pay to ThinkEquity a non-accountable expense allowance of $30,000 and reimburse ThinkEquity for its legal
expenses in connection with the offering in the amount of $50,000. The Company granted to ThinkEquity a right of first refusal
for a period of nine months following the closing of the offering, to act as sole financial advisor, sole investment banker, sole
book-runner, and/or sole placement agent, for each and every future public and private equity and debt offering of the Company
during such period, on terms and conditions customary to ThinkEquity. The Company will also pay Mesodi Consultation & Investments,
Ltd. (“Mesodi”) a fee of $89,000 and will issue to Mesodi warrants to purchase 89,000 shares of common stock. Such
warrants will have the same terms as the Warrants issued to the investors, in connection with the private placement.
In connection
with the Purchase Agreement, on October 19, 2018 the Company and its wholly-owned subsidiary Wize Pharma Ltd. (“Wize Israel”)
entered into an amendment to the existing convertible loan (the “Amendment”). Pursuant to Amendment, the maturity date
under the (i) 2016 Loan Agreement, and (ii) 2017 Loan Agreement, was amended to be the earliest of (a) 90 days following the date
that the registration statement the Company will file under the Registration Rights Agreement covering the resale of all common
stock, issued pursuant to the Purchase Agreement, and issuable upon conversion of the Series A Preferred Stock and exercise of
the Warrants, are registered for resale for investors who are not a party to the Loan Agreements Amendment, (b) 90 days following
the date on which all securities issued to investors under the Purchase Agreement are no longer deemed registrable securities under
the Registration Rights Agreement, and (c) one year following the closing under the Purchase Agreement. In addition, pursuant to
the Amendment, the expiration date of the investment right under the 2016 Loan Agreement and the 2017 Loan Agreement was amended
to be 180 days after the Loan Agreements Maturity Date.
PART
II
INFORMATION
NOT REQUIRED IN PROSPECTUS
ITEM
13.
|
OTHER
EXPENSES OF ISSUANCE AND DISTRIBUTION.
|
The
following is a statement of approximate expenses to be incurred by Wize Pharma, Inc., or Wize, the Company, we, us or our, in
connection with the distribution of the securities registered under this registration statement. All amounts shown are estimates
except for the SEC registration fee.
|
|
Amount
|
|
SEC registration fee
|
|
$
|
3,870.52
|
|
Legal fees and expenses
|
|
$
|
90,000
|
|
Accountant’s fees and expenses
|
|
$
|
5,000
|
|
Printing expenses
|
|
$
|
1,000
|
|
Miscellaneous
|
|
$
|
1,000
|
|
Total
|
|
$
|
100,870.52
|
|
ITEM
14.
|
INDEMNIFICATION
OF DIRECTORS AND OFFICERS.
|
As
a corporation incorporated in the State of Delaware, we are subject to the Delaware General Corporation Law (“DGCL”).
Section 102(b)(7) of the DGCL allows a corporation to provide in its certificate of incorporation that a director of the
corporation will not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except where the director breached the duty of loyalty, failed to act in good faith, engaged in intentional
misconduct or knowingly violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware
corporate law or obtained an improper personal benefit. Our charter provides for this limitation of liability.
Section 145
of the DGCL (“Section 145”), provides, among other things, that a Delaware corporation may indemnify any person who
was, is or is threatened to be made, party to any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact
that such person is or was an officer, director, employee or agent of such corporation or is or was serving at the request of
such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses
(including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person
in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the corporation’s best interests and, with respect to any criminal action or proceeding,
had no reasonable cause to believe that his or her conduct was unlawful. A Delaware corporation may indemnify any persons who
were or are a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of
the fact that such person is or was a director, officer, employee or agent of another corporation or enterprise. The indemnity
may include expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection with the
defense or settlement of such action or suit, provided such person acted in good faith and in a manner he or she reasonably believed
to be in or not opposed to the corporation’s best interests, provided further that no indemnification is permitted without
judicial approval if the officer, director, employee or agent is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify
him or her against the expenses (including attorneys’ fees) which such officer or director has actually and reasonably incurred.
Section 145
further authorizes a corporation to purchase and maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or
agent of another corporation or enterprise, against any liability asserted against such person and incurred by such person in
any such capacity, or arising out of his or her status as such, whether or not the corporation would otherwise have the power
to indemnify such person under Section 145.
Our
charter and bylaws provide that we must indemnify and advance expenses to our directors and officers to the full extent authorized
by the DGCL.
We
entered into indemnification agreements with our directors and officers pursuant to which we agreed to indemnify each director
and officer for any liability he or she may incur by reason of the fact that he or she serves as our director or officer, to the
maximum extent permitted by law.
We
expect to maintain standard policies of insurance that provide coverage (1) to our directors and officers against loss arising
from claims made by reason of breach of duty or other wrongful act as defined in the policy and (2) to us with respect to
indemnification payments that we may make to such directors and officers.
The
indemnification rights set forth above shall not be exclusive of any other right which an indemnified person may have or hereafter
acquire under any statute, any provision of our charter, bylaws, agreement, vote of stockholders or disinterested directors or
otherwise. Notwithstanding the foregoing, we shall not be obligated to indemnify a director or officer in respect of a proceeding
(or part thereof) instituted by such director or officer, unless such proceeding (or part thereof) has been authorized by our
Board pursuant to the applicable procedure outlined in our bylaws.
Section 174
of the DGCL provides, among other things, that a director, who willfully or negligently approves of an unlawful payment of dividends
or an unlawful stock purchase or redemption, may be held jointly and severally liable for such actions. A director who was either
absent when the unlawful actions were approved or dissented at the time may avoid liability by causing his or her dissent to such
actions to be entered in the books containing the minutes of the meetings of the board of directors at the time such action occurred
or immediately after such absent director receives notice of the unlawful acts.
ITEM
15.
|
RECENT
SALES OF UNREGISTERED SECURITIES.
|
Over
the past three years, we have issued and sold the following securities without registration under the Securities Act:
On
November 16, 2017, in connection with a private placement of Wize Pharma Ltd., we issued to Yosef Eliyahu Peretz, Yaakov Zarachia,
Simcha Sadan and Jonathan Brian Rubini warrants to purchase up to 904,038 shares of our Common Stock, in the aggregate, at an
exercise price of $1.9728 per share. The warrants are fully vested and will expire on November 16, 2020.
On
March 26, 2018, Simcha Sadan exercised a portion of his 2017 Warrants and was issued 144,168 shares of our Common Stock. Otherwise,
none of the 2017 Warrants have been exercised.
On
April 4, 2018, we issued 6,945 shares of our Common Stock, valued at $23,317, to Corporate Profile, LLC, in payment of a portion
of the consulting fee for investor relations services owed to Corporate Profile, LLC pursuant to a letter agreement, dated February
1, 2018, between Corporate Profile, LLC and the Company.
On
April 23, 2018, we issued 5,208 shares of our Common Stock, valued at $29,165, to Yosef Shimony, C.P.A (“Shimony”),
in payment of a portion of the consulting fee for finance services owed to Shimony pursuant to a letter agreement, dated January
1, 2018, between Shimony and the Company.
On
April 4, 2018, we granted to our officers, directors and a consultant, 131,200 fully vested RSUs and options exercisable into
229,500 shares of our Common Stock at an exercise price of $3.59 per share of Common stock. The options will vest quarterly over
a period of 36 months.
On
June 25, 2018, we issued 6,945 shares of our Common Stock, with a fair market value of $40,559, to Corporate Profile, LLC, in
payment of a portion of the consulting fee for investor relations services owed to Corporate Profile, LLC pursuant to a letter
agreement, dated February 1, 2018, between Corporate Profile, LLC and the Company.
On
June 25, 2018, we issued 5,208 shares of our Common Stock, with a fair market value of $30,415, to Shimony, in payment of a portion
of the consulting fee for finance services owed to Shimony pursuant to a letter agreement, dated January 1, 2018, between Shimony
and the Company.
In
July 2018, we issued 67,778 shares of Common Stock to certain service providers in exchange for services to be provided in 2018.
In
August 2018, we issued to a consultant options to purchase 25,500 shares of Common Stock at an exercise price of $4.50 per share
of Common Stock. The options will vest quarterly over a period of 36 months.
On
February 22, 2018, we received a notice from a certain lender to exercise a portion of its 2017 Investment Rights to purchase
an aggregate of 213,524 shares of Common Stock at an exercise price per share of $1.332. In April, May and July 2018, the Company
received an aggregate amount of $284,000, and in July 2018 issued 213,524 shares of Common stock.
October
2018 Private Placement
On
October 22, 2018, the Company entered into the Securities Purchase Agreement with accredited investors. Pursuant to the Purchase
Agreement, the Company agreed to sell to the investors, and the investors agreed to purchase from the Company, in a private placement,
an aggregate of (i) 3,100,000 shares of Common Stock, for a purchase price of $1.00 per share, and (ii) 1,350 shares of newly
created Series A Preferred Stock (each convertible into 1,000 shares of Common Stock), for a purchase price of $1,000 per share,
for aggregate gross proceeds under the Purchase Agreement of $4,450,000. The Company also agreed to issue to the investors Series
A Warrants to purchase an aggregate of 4,450,000 shares of Common Stock (equal to 100% of the shares of Common Stock sold (on
an as-converted basis with respect to shares of Series A Preferred Stock)), and Series B Warrants to purchase an aggregate of
4,450,000 shares of Common Stock (equal to 100% of the shares of Common Stock sold (on an as-converted basis with respect to shares
of Series A Preferred Stock)). The Series A Warrants will have an exercise price of $1.10 per share, and the Series B Warrants
will have an exercise price of $1.00 per share. The transactions contemplated by the Purchase Agreement closed on October 24,
2018, 2018. The investors under the Purchase Agreement include prior investors in the Company and a lender to the Company.
The
Series A Warrants have a term of 5 years from issuance, and the Series B Warrants have a term that expires 20 days following the
later of (i) the public announcement of Phase II clinical data for LO2A and (ii) six months following the issuance date, provided
that, for each day after the issuance date that an Equity Conditions Failure (as defined in the Series B Warrants) has occurred,
the expiration date of the Series B Warrants will be extended by one day.
In
the event that, during the period commencing upon execution of the Purchase Agreement, and expiring on the trading day immediately
following the date that the Company has raised, beginning after the issuance date of the warrants, at least $10 million in gross
proceeds from the issuance of the Company’s securities, the Company issues or sells Common Stock (or securities convertible
into or exercisable into Common Stock) at a purchase price (or conversion or exercise price, as applicable) lower than the exercise
price of the warrants, than the exercise price of the Warrants will be reduced to such lower price, subject to certain exceptions.
The
Warrants will be exercisable on a cashless basis in the event that, six months after the closing of the Purchase Agreement, there
is not an effective registration statement for the resale of the shares underlying the warrants. The warrants may not be exercised
to the extent such exercise would cause the holder to beneficially own more than 4.99% (or 9.99%, at the election of the investor)
of the Company’s outstanding Common Stock.
In
connection with the Purchase Agreement, on October 22, 2018, the Company filed the Series A Certificate of Designations with the
Secretary of State of Delaware. Pursuant to the Series A Certificate of Designations, the Company designated 1,350 shares of preferred
stock as Series A Preferred Stock. The Series A Preferred Stock has a stated value of $1,000 per share and is convertible into
shares of Common Stock in an amount determined by dividing the stated value of $1,000 by the conversion price of $1.00, such that
each share of Series A Preferred Stock is convertible into 1,000 shares of Common Stock. The Series A Preferred Stock may not
be converted into Common Stock to the extent such conversion would cause the holder to beneficially own more than 4.99% (or 9.99%,
at the election of the investor) of the Company’s outstanding Common Stock. The Series A Preferred Stock is entitled to
dividends on an as-converted basis with the Common Stock. The Series A Preferred Stock votes with the Common Stock on an as-converted
basis, subject to the beneficial ownership limitation.
The
Company engaged ThinkEquity as the placement agent for the private placement. The Company has issued to ThinkEquity or its designees
warrants to purchase 267,000 shares of Common Stock (equal to 6% of the shares of Common Stock sold (on an as-converted basis
with respect to shares of Series A Preferred Stock)). Such warrants have an exercise price of $1.00 per share and otherwise have
the same terms as the Series A Warrants issued to the investors. The Company also paid Mesodi a fee of $89,000 and has issued
to Mesodi the Advisor Warrants to purchase 89,000 shares of Common Stock at an exercise price of $1.10 per share. Such warrants
have the same terms as the Series A Warrants issued to the investors, in connection with the private placement.
We
believe that all of the foregoing sales qualified for exemption under Section 4(a)(2) of the Securities Act since the issuance
of the securities by us did not involve a public offering. The offerings were not “public offerings” as defined in
Section 4(a)(2) due to the type of investors, the insubstantial number of investors involved in the offering, the size of the
offering, the manner of the offering and number of securities offered. In addition, these security holders represented as to the
necessary investment intent as required by Section 4(a)(2). Some of the foregoing sales were exempt from registration under Regulation
D, and/or qualified as offshore transactions under Regulation S, each as promulgated under the Securities Act. We did not employ
an underwriter in connection with the issuance of the securities described above.
ITEM
16.
|
EXHIBITS
AND FINANCIAL STATEMENT SCHEDULES.
|
(a)
Exhibits.
The
exhibits filed and furnished with this registration statement are set forth on the
“Exhibit Index”
set forth
elsewhere herein.
(b)
Financial Statement Schedules.
All
other schedules for which provision is made in the applicable accounting regulations of the SEC are not required under the related
instructions, or are inapplicable, and therefore have been omitted.
The
undersigned Registrant hereby undertakes:
(A) (1)
To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:
(i)
To include any prospectus required by Section 10(a)(3) of the Securities Act;
(ii)
To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if
the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high
end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate
offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
(iii)
To include any material information with respect to the plan of distribution not previously disclosed in the registration statement
or any material change to such information in the registration statement.
(2)
That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial
bona fide
offering thereof.
(3)
To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4)
That, for the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule
424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B
or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration
statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a
registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated
by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser
with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement
or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first
use.
(B) Insofar
as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant
will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will
be governed by the final adjudication of such issue.
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the Registrant has duly caused this registration statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Hod Hasharon, Israel on the 21
st
day of November
2018.
|
WIZE
PHARMA, INC.
|
|
|
|
By:
|
/s/
Or Eisenberg
|
|
|
Name:
|
Or
Eisenberg
|
|
|
Title:
|
Acting
Chief Executive Officer,
Chief Financial Officer,
Treasurer and Secretary
|
POWERS
OF ATTORNEY
Each
of the undersigned officers and directors of Wize Pharma, Inc., a Delaware corporation, hereby constitutes and appoints Or Eisenberg
and Noam Danenberg and each of them, severally, as his or her attorney-in-fact and agent, with full power of substitution and
resubstitution, in his or her name and on his or her behalf, to sign in any and all capacities this registration statement and
any and all amendments (including post-effective amendments) and exhibits to this registration statement and any and all applications
and other documents relating thereto, with the Securities and Exchange Commission, with full power and authority to perform and
do any and all acts and things whatsoever which any such attorney or substitute may deem necessary or advisable to be performed
or done in connection with any or all of the above described matters, as fully as each of the undersigned could do if personally
present and acting, hereby ratifying and approving all acts of any such attorney or substitute.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/
Or Eisenberg
|
|
Acting
Chief Executive Officer,
|
|
November
21, 2018
|
Or
Eisenberg
|
|
Chief Financial Officer,
|
|
|
|
|
Treasurer
and Secretary
|
|
|
|
|
|
|
|
/s/
Noam Danenberg
|
|
Chairman
of the Board
|
|
November
21, 2018
|
Noam
Danenberg
|
|
|
|
|
|
|
|
|
|
/s/
Yossi Keret
|
|
Director
|
|
November
21, 2018
|
Yossi
Keret
|
|
|
|
|
|
|
|
|
|
/s/
Franck Amouyal
|
|
Director
|
|
November
21, 2018
|
Franck
Amouyal
|
|
|
|
|
|
|
|
|
|
/s/
Joseph Zarzewsky
|
|
Director
|
|
November
21, 2018
|
Joseph
Zarzewsky
|
|
|
|
|
|
|
|
|
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/s/
Michael Belkin
|
|
Director
|
|
November
21, 2018
|
Michael
Belkin
|
|
|
|
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EXHIBIT
INDEX
Exhibit
Number
|
|
Description
|
2.1†
|
|
Agreement
and Plan of Merger, dated as of May 21, 2017, by and among the Company, Bufiduck Ltd. and Wize Pharma Ltd. (Incorporated by
reference to Company’s Current Report on Form 8-K filed with the SEC on May 22, 2017)
|
|
|
|
2.2
|
|
Amendment
No. 1 to Agreement and Plan of Merger, dated as of October 31, 2017, by and among the Company, Bufiduck Ltd. and Wize Pharma
Ltd. (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on November 1, 2017)
|
|
|
|
2.3
|
|
Acquisition
Agreement, dated November 21, 2011, with Can-Fite Biopharma Ltd. (Incorporated by reference to Company’s Current Report
on Form 8-K filed with the SEC on November 23, 2011)
|
|
|
|
2.4
|
|
Agreement
and Plan of Merger, dated February 24, 2012 (Incorporated by reference to Company’s Current Report on Form 8-K filed
with the SEC on April 5, 2012)
|
|
|
|
2.5
|
|
Delaware
Certificate of Merger (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on April
5, 2012)
|
|
|
|
2.6
|
|
Nevada
Articles of Merger (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on April 5,
2012)
|
|
|
|
3.1
|
|
Certificate
of Incorporation (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on April 5, 2012)
|
|
|
|
3.2
|
|
Certificate
of Amendment to Certificate of Incorporation (Incorporated by reference to Company’s Current Report on Form 8-K filed
with the SEC on July 18, 2013)
|
|
|
|
3.3
|
|
Certificate
of Amendment to Certificate of Incorporation dated November 15, 2017 (Incorporated by reference to Company’s Current
Report on Form 8-K filed with the SEC on November 21, 2017)
|
|
|
|
3.4
|
|
Certificate
of Amendment to Certificate of Incorporation dated March 1, 2018 (Incorporated by reference to Company’s Current Report
on Form 8-K filed with the SEC on March 5, 2018)
|
|
|
|
3.5
|
|
Form
of Series A Certificate of Designation (Incorporated by reference to Company’s Current Report on Form 8-K filed with
the SEC on October 23, 2018)
|
|
|
|
3.6
|
|
Bylaws
(Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on May 10, 2013)
|
|
|
|
4.1
|
|
Specimen
Common Stock Certificate (Incorporated by reference to Company’s Registration Statement on Form S-1 filed with the SEC
on February 6, 2018)
|
|
|
|
4.2
|
|
Form
of PIPE Warrant (Incorporated by reference to Company’s Registration Statement on Form S-1 filed with the SEC on February
6, 2018)
|
|
|
|
4.3
|
|
Form
of Series A and B Warrant (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on October
23, 2018)
|
|
|
|
5.1#
|
|
Opinion of Sichenzia Ross Ference LLP
|
|
|
|
10.1
|
|
Stock
Purchase Agreement, dated November 21, 2011, with Can-Fite Biopharma Ltd. (Incorporated by reference to Company’s Current
Report on Form 8-K filed with the SEC on November 23, 2011)
|
|
|
|
10.2+
|
|
2012
Stock Incentive Plan (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on February
9, 2012)
|
|
|
|
10.3+
|
|
2012
Stock Incentive Plan, Annex A (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC
on March 8, 2013)
|
|
|
|
10.4
|
|
Agreement
dated July 1, 2013, with Michael Belkin (Incorporated by reference to Company’s Registration Statement on Form S-1 filed
July 2, 2013)
|
|
|
|
10.5
|
|
Form
of Stock Purchase Agreement (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on
May 22, 2017)
|
|
|
|
10.6
|
|
Form
of Termination of License Agreement (Incorporated by reference to Company’s Current Report on Form 8-K filed with the
SEC on May 22, 2017)
|
10.7
|
|
Form of Termination of Services Agreement (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on May 22, 2017)
|
|
|
|
10.8
|
|
Exclusive Distribution and Licensing Agreement dated May 1, 2015 between Resdevco Ltd. and Wize Pharma Ltd. (formerly Star Night Technologies Ltd.) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.9
|
|
Amendment to Licensing Agreement dated November 22, 2015 between Resdevco Ltd. and Wize Pharma Ltd. (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.10
|
|
Amendment No. 2 to Licensing Agreement dated March 20, 2016 between Resdevco Ltd. and Wize Pharma Ltd. (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.11
|
|
Amendment No. 1 to Licensing Agreement – Israeli Market dated May 31, 2016 between Resdevco Ltd. and Wize Pharma Ltd. (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.12
|
|
Amendment No. 2 to Licensing Agreement – Ukraine Market dated May 31, 2016 between Resdevco Ltd. and Wize Pharma Ltd. (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.13
|
|
Addition to Amendment to Licensing Agreement dated January 6, 2017 between Resdevco Ltd. and Wize Pharma Ltd. (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.14
|
|
Second Addition to Amendment to Licensing Agreement dated March 30, 2017 between Resdevco Ltd. and Wize Pharma Ltd. (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.15
|
|
Correction to Licensing Agreement dated June 16, 2017 between Resdevco Ltd. and Wize Pharma Ltd. (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.16
|
|
Appendix F to Exclusive Distribution and Licensing Agreement between Resdevco Ltd. and Wize Pharma Ltd. signed on May 1, 2015 dated July 20, 2017 (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.17
|
|
Appendix G to Exclusive Distribution and Licensing Agreement between Resdevco Ltd. and Wize Pharma Ltd. signed on May 1, 2015 dated July 20, 2017 (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.18
|
|
Assumption Agreement dated August 30, 2016 between Resdevco Ltd. and OcuWize Ltd (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.19
|
|
Convertible Loan Agreement dated March 20, 2016 between Wize Pharma Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.20
|
|
Addendum to Convertible Loan Agreement dated March 30, 2016 between Wize Pharma Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.21
|
|
Second Convertible Loan Agreement dated January 12, 2017 between Wize Pharma Ltd. Ridge Valley Corporation and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.22
|
|
Debenture Floating Charge dated March 20, 2016 between Wize Pharma Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.23
|
|
Debenture - Fixed Charge dated March 20, 2016 between Wize Pharma Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.24
|
|
Debenture Floating Charge dated October 26, 2016 between Ocu Wize Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.25
|
|
Debenture – Fixed Charge dated October 26, 2016 between Ocu Wize Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
10.26
|
|
Amendment to Debenture – Floating Charge dated March 28, 2017 between Wize Pharma Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.27
|
|
Amendment to Debenture – Fixed Charge dated March 28, 2017 between Wize Pharma Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.28
|
|
Amendment to Debenture – Floating Charge dated March 28, 2017 between Ocu Wize Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.29
|
|
Amendment to Debenture – Fixed Charge dated March 28, 2017 between Ocu Wize Ltd. and Rimon Gold Assets Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.30
|
|
Form of Irrevocable Guaranty and Undertaking (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.31
|
|
Private Placement Agreement dated May 25, 2017 between Wize Pharma Ltd. and Jonathan Brian Rubini (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.32
|
|
Addendum to Private Placement Agreement dated June 15, 2017 between Wize Pharma Ltd. and Jonathan Brian Rubini (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.33
|
|
Private Placement Agreement dated June 23, 2017 between Wize Pharma Ltd. and Simcha Sadan (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
|
|
10.34
|
|
Private Placement Agreement dated June 23, 2017 between Wize Pharma Ltd. and Yaakov Zarachia (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
|
|
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10.35
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Private Placement Agreement dated June 23, 2017 between Wize Pharma Ltd. and Peretz Yosef Eliahu (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
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10.36+
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Employment Agreement dated September 30, 2015 between Wize Pharma Ltd. and Or Eisenberg (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
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10.37+
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Agreement for Provision of Services Agreement dated September 30, 2015 between Wize Pharma Ltd. and N Danenberg Holdings (2000) Ltd. (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
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10.38+
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Agreement for Provision of Services Agreement dated September 30, 2015 between Wize Pharma Ltd. and Ron Mayron (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
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10.39
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Finder’s Agreement dated June 19, 2017 between Wize Pharma Ltd. and Harbin Israel (Trading) Ltd. (Incorporated by reference to Company’s Registration Statement on Form S-4 filed with the SEC on July 27, 2017)
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10.40
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Letter dated September 6, 2017 from Resdevco Ltd. (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on November 21, 2017)
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10.41
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Agreement dated September 25, 2017 between Resdevco Ltd. and Wize Pharma Ltd. (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on November 21, 2017)
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10.42
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Letter Amendment to Convertible Loans, dated as of December 21, 2017, by and between Wize Pharma, Inc., Wize Pharma Ltd., Ridge Valley Corporation, Rimon Gold Assets Ltd. and Shimshon Fisher (unofficial English translation from Hebrew) (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on December 27, 2017)
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10.43**
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Third Amendment to Exclusive Distribution and Licensing Agreement by and between Wize Pharma Ltd. and Resdevco Research and Development Company Ltd., dated December 26, 2017 (Incorporated by reference to Company’s Annual Report on Form 10-K filed with the SEC on March 29, 2018)
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10.44**
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Memorandum of Understanding by and between Wize Pharma Ltd. and Resdevco Research and Development Company Ltd., dated January 8, 2018 (Incorporated by reference to Company’s Annual Report on Form 10-K/A filed with the SEC on June 5, 2018)
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10.45+
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|
2018 Equity Incentive Plan (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on February 28, 2018)
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10.46**
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Exclusive Distribution Agreement by and between HPGC Medical Co., Ltd. and Wize Pharma Ltd., dated as of May 31, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on June 5, 2018)
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10.47+
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Amendment to 2018 Equity Incentive Plan, dated August 15, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on August 21, 2018 )
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10.48+
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|
Employment Agreement, dated August 21, 2018, between Wize Pharma Ltd. and Or Eisenberg 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on August 22, 2018)
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10.49+
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Consulting Services Agreement, dated August 20, 2018, between Wize Pharma Ltd., N. Danenberg Holdings (2000) Ltd. and Noam Danenbeg (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on August 22, 2018)
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10.50
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Form of Purchase Agreement dated October 22, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on October 23, 2018)
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10.51
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Form of Registration Rights Agreement dated October 22, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on October 23, 2018)
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10.52
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Placement Agency Agreement dated October 22, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on October 23, 2018)
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10.53
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Convertible Loan Amendment dated October 19, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on October 23, 2018)
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10.54
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Amendment No.1 to Consulting Services Agreement dated November 7, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on November 14, 2018)
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10.55
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Consulting Agreement dated November 7, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on November 14, 2018)
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21.1
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Subsidiaries of the Company (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on November 21, 2017)
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23.1#
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Consent
of Fahn Kanne & Co. Grant Thornton Israel
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23.2
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Consent of Sichenzia Ross Ference LLP (included in Exhibit 5.1)
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24.1
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Power of Attorney (Included in the signature page hereto)
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#
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Filed herewith
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†
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Exhibits and schedules to this exhibit have been omitted pursuant to Item 601(b)(2) of Regulation S-K. We will furnish the omitted exhibits and schedules to the Securities and Exchange Commission upon request by the Securities and Exchange Commission.
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+
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Management compensatory plan
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**
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Confidential treatment was requested with respect to certain portions of this exhibit pursuant to 17.C.F.R. §240.24b-2. Omitted portions were filed separately with the SEC.
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