The accompanying notes are an integral
part of the unaudited interim consolidated financial statements.
The accompanying notes are an integral
part of the unaudited interim consolidated financial statements.
The accompanying
notes are an integral part of the unaudited interim consolidated financial statements.
The accompanying notes are an integral
part of the unaudited interim consolidated financial statements.
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
|
a.
|
Wize Pharma, 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
(the “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. (“OcuWize”), a wholly-owned Israeli subsidiary which manages
and develops most of the Company’s activity under an existing license agreement. In May 2015, Wize Israel entered into an
Exclusive Distribution and Licensing Agreement (as amended, the “License Agreement”), with Resdevco Research and Development
Company Ltd. (“Resdevco”). Pursuant to the License Agreement., Resdevco granted to Wize Israel (and thereafter, to
OcuWize) an exclusive license to develop in the United States, under the LO2A licensed technology, products in the field of ophthalmic
disorders, 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.
For discussion regarding the issuance
of mandatorily redeemable Series B Preferred Stock as a partial financing, concurrently with the recognition of an obligation with
respect to 37% of future revenues of L02A-based products (“LO2A Proceeds”) (if any) and the purchase of Bonus BioGroup
Ltd. (“Bonus”) shares (marketable equity securities) occurring in February 2020, see also Note 5.
|
b.
|
Going concern uncertainty and management plans:
|
The Company has not yet generated
any material revenues from its current operations, and therefore is dependent upon external sources for financing its operations.
As of March 31, 2020, the Company has an accumulated deficit of $38,199.
In addition, in the period and year ended March 31, 2020
and December 31, 2019, respectively, the Company reported operating 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 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 and repay existing
indebtedness 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.
Regarding the issuance of mandatorily
redeemable Series B Preferred Stock (as hereinafter defined) concurrently with the Bonus transaction in January 2020 see also Note
5.
WIZE PHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
As of March 31, 2020, the Company
had an accumulated deficit of $38,199. 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 material 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 and general and administrative expenses.
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 and in connection with the obligation with respect to future revenues;
■ 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 Conjunctivochalasis (“CCH”), Sjögren’s syndrome
(“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.
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.
|
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES
|
The financial statements have been
prepared in accordance with accounting principles generally accepted in the United States.
|
a.
|
Use of estimates in preparation of the financial statements:
|
The preparation of the financial
statements in conformity with accounting principles generally accepted in the United States 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.
WIZE PHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
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.
The significant accounting policies applied in the annual
consolidated financial statements of the Company as of December 31, 2019 are applied consistently in these financial statements,
except the following:
Contingent obligation with
respect to future revenues
The Company’s contingent obligation
to payment of 37% of the future LO2A Proceeds, if any, was accounted for as long-term debt in accordance with the provisions of
Accounting Standards Codification (“ASC”) 470-10-25, “Sales of Future Revenues or Various other Measures of Income,”
which relates to cash received in exchange for payments of a specified percentage or amount of revenue or other measure of income
of a particular product line, business segment, trademark, patent, or contractual right.
Such repayment obligations
are contingent upon the receipt by the Company of any future proceeds from LO2A sales, license or other, as described in Note
5 below.
The Company elected to measure
the contingent payment obligation in its entirety, at its fair value (the “Fair Value Option”) in accordance with
ASC 825-10, “Financial Instruments” due to the variable and contingent nature of the repayment provisions of such
financial liability.
The fair value of such liability
was measured upon its initial recognition at its fair value, based on the difference between the fair value of the marketable
securities received by the Company, less the amount of cash paid by the Company. In subsequent periods the fair value of the liability
for contingent payment obligation is based on management estimate.
The Company has determined
that the fair value of the contingent payment obligation falls within Level 3 in the fair value hierarchy which involves significant
estimates and assumptions including, among others, any projected future proceeds from the LO2A, the risk-adjusted rate for discounting
future cash flows and other relevant assumptions. Actual results could differ from the estimates made. Changes in fair
value (including the component related to imputed interest), are included in the consolidated statements of comprehensive income
(loss) as part of financial income (loss) under the heading “Changes in fair value of contingent payment obligation with
respect to future revenues.”
Due to the short period from
the initial recognition of the contingent payment obligation and until March 31, 2020, management has determined that there were
no changes in the fair value of the liability.
WIZE PHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
Mandatorily redeemable Series
B Preferred Stock
The Company classified its newly
created Series B Non-Voting mandatorily redeemable Preferred Stock as a liability, as their terms embody an unconditional obligation
of the Company to redeem the shares by transferring cash or other assets (80% of the proceeds received by the Company through future
sales of the Bonus Shares issued to the Company under the Bonus Agreements (as hereinafter defined) and (ii) 80% of any cash dividends
received by the Company on such Bonus Shares) at a specified or determinable date or dates.
As the mandatory redemption date
is December 28, 2020 (or earlier), the liability was classified as short-term debt.
The Company elected to measure this
liability in its entirety, at its fair value (the “Fair Value Option”) in accordance with ASC 825-10, “Financial
Instruments” due to the variable and contingent nature of the redemption price of such financial liability.
Upon initial recognition and in
subsequent periods, the Company measured the fair value of the liability related to the Series B Non-Voting mandatorily redeemable
Preferred Stock based on the value of the Bonus Shares and the cash amount that the Company is required to transfer to the Series
B investors upon the redemption of the mandatorily redeemable Series B Preferred Stock. The difference between the amount received
by the Company upon the issuance of the mandatorily redeemable Series B Preferred Stock and their fair value as of that date was
carried immediately to the consolidated statements of comprehensive income (loss) as part of financial income (loss) under the
heading “net change from recognition and revaluation of mandatorily redeemable series preferred stock.”
The issuance costs of the mandatorily
redeemable Series B Preferred Stock were recognized immediately as an expense.
|
b.
|
Basic and diluted income (loss) per share:
|
Basic loss per share is computed
by dividing the loss for the period applicable to common shareholders by the weighted average number of shares of Common Stock
outstanding during the period. Securities that may participate in dividends with the Common Stock (such as the convertible Series
A Preferred Stock) are considered in the computation of basic income (loss) per share using the two-class method. In periods of
net loss, such participating securities are included in the computation, since the holders of such securities have a contractual
obligation to share the losses of the Company (as the convertible Series A Preferred Stock do not have a right to receive any mandatory
redemption amount and as they are entitled only to dividends on an as-converted basis together with the common shares).
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, warrants
and rights for future investment 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 periods ended March 31,
2020 and 2019, 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.
WIZE PHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 2:-
|
SIGNIFICANT ACCOUNTING POLICIES (Cont.)
|
The income (loss) and the weighted
average number of shares used in computing basic and diluted net income (loss) per share for the three months ended March 31, 2020
and 2019, are as follows:
|
|
Three months ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Numerator:
|
|
|
|
|
Net income (loss)
|
|
$
|
(4,300
|
)
|
|
$
|
148
|
|
Less: Net income (loss) attributed to preferred stock
|
|
|
48
|
|
|
|
(15
|
)
|
Add: Deemed dividend with respect to right for future investment
|
|
$
|
-
|
|
|
$
|
(104
|
)
|
|
|
|
|
|
|
|
|
|
Net income (loss) applicable to shareholders of Common Stock
|
|
$
|
(4,252
|
)
|
|
$
|
29
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
Shares of common stock used in computing basic and diluted net income (loss) per share
|
|
|
15,989,106
|
|
|
|
9,057,325
|
|
Net income (loss) per share of Common stock, basic and diluted
|
|
$
|
(0.27
|
)
|
|
$
|
0.00
|
(*)
|
During the year ended December 31, 2018 the Company issued
Series A preferred stock as part of the October 2018 transaction. These preferred shares are participating securities.
|
|
Three
months ended
March
31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Number of shares:
|
|
|
|
|
|
|
Common shares used
in computing basic income (loss) per share
|
|
|
15,989,106
|
|
|
|
9,057,325
|
|
Common shares used in computing
diluted income (loss) per share
|
|
|
15,989,106
|
|
|
|
9,057,325
|
|
|
|
|
|
|
|
|
|
|
Preferred Stock, options and warrants
excluded from the calculations of diluted income (loss) per share
|
|
|
16,693,339
|
|
|
|
11,177,003
|
|
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. Accordingly, they do not include all the information and footnotes required by accounting principles
generally accepted in the United States for complete financial statements. 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 three-month period ended March 31, 2020 are not necessarily indicative of the results that may be expected for
the year ending December 31, 2020 or for any other interim period. The accompanying Financial Statements and related
notes should be read in conjunction with the audited consolidated financial statements and related notes for the fiscal year
ended December 31, 2019, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019, as
filed with the U.S. Securities and Exchange Commission (“SEC”) on March 30, 2020 (the “2019 Form
10-K”). The accompanying consolidated balance sheet as of December 31, 2019 has been derived from these audited
consolidated statements.
WIZE PHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
|
NOTE 4:-
|
STOCKHOLDERS’ EQUITY
|
|
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 January 9, 2020, the Company entered into the Bonus Agreements
and the Series B Purchase Agreement (as such terms are defined below), whereby, subject to the closing of both transactions,
(i) the Company will sell 37% of future revenues (if any) from its LO2A Proceeds to Bonus, an Israeli company whose ordinary
shares are traded on the Tel Aviv Stock Exchange (“TASE”), and invest cash amount of $7,400 in Bonus and (ii)
in consideration therefor, Bonus will issue to Wize new ordinary shares of Bonus in a number equal to $16,400 divided by a
purchase price per share of NIS 0.50 (approximately $0.12). The transaction was closed on February 19, 2020. The fair value
of Bonus ordinary shares based on a quote of the share price of the date of the agreement was $0.12 and as of the date of
the closing was $0.11.
|
NOTE 5:-
|
SIGNIFICANT
TRANSACTIONS
|
The
Bonus/LO2A Transaction
On January
9, 2020, the Company entered into (i) an Exchange Agreement (the “Bonus Exchange Agreement”), with Bonus and (ii) a
Share Purchase Agreement (the “Bonus Purchase Agreement” and, together with the Bonus Exchange Agreement, the “Bonus
Agreements”) with Bonus.
Pursuant to
the Bonus Agreements, the Company agreed to grant Bonus, in consideration for the issuance of 62,370,000 ordinary shares of Bonus
(the “LO2A Shares”), the right to receive 37% of future LO2A Proceeds (if any), which, as more fully defined in the
Bonus Exchange Agreement, includes proceeds generated by the Company, Wize Israel and OcuWize, as a result of (i) the sale, license
or other disposal of products or other rights underlying the LO2A technology licensed to OcuWize under the License Agreement; and
(ii) a Sale Transaction, which, as more fully defined in the Bonus Exchange Agreement, includes the sale of shares or assets of
Wize Israel and/or OcuWize. In addition, if the Sale Transaction involves a change of control of the Company, Bonus will be entitled
to elect, to either remain with its right to 37% of the LO2A Proceeds or receive a one-time payment equal to 37% of the value attributed
to Wize Israel out of the total proceeds payable for the Company in such transaction.
In addition,
pursuant to the Bonus Purchase Agreement, the Company agreed to purchase 51,282,000 ordinary shares of Bonus (the “PIPE Shares”,
and together with the LO2A Shares, the “Bonus Shares”), for an aggregate purchase price of $7,400 in cash, which funds
will be deposited directly into an escrow account (the “Bonus Escrow Account”), of which (i) $500 will be paid to Bonus
as an advance promptly following execution of the Bonus Purchase Agreement, (ii) $3,200 will be released to Bonus concurrently
with the closing of the transactions contemplated by the Bonus Agreements in exchange for 50% of the PIPE Shares and (iii) $3,700
will be released to Bonus upon the Milestone Closing (as defined in the Bonus Purchase Agreement), in exchange for the remaining
50% of the PIPE Shares that will be issued by Bonus and deposited into the escrow at the closing. The Company’s obligation
to consummate the Milestone Closing is conditioned upon the satisfaction by Bonus of certain conditions, including the listing
of its ordinary shares (or, if an ADR Program is to be implemented by Bonus, the American Depositary Shares representing such ordinary
shares) on the Nasdaq Capital Market (or another superior tier of the Nasdaq market) (the “Nasdaq Listing”).
WIZE PHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
|
NOTE 5:-
|
SIGNIFICANT TRANSACTIONS (Cont.)
|
The Bonus Agreements contain customary
covenants, representations and warranties of the parties thereto, including, among others, (i) a covenant by the Company to use
its reasonable commercial efforts to commercialize the LO2A technology or otherwise generate the LO2A Proceeds; (ii) a covenant
by Bonus to issue additional shares to the Company upon certain events, including if Bonus conducts a private placement of its
ordinary shares during the nine-month period following the closing at a price per share that is below NIS 0.30 per share; (iii)
a covenant by Bonus to use its reasonable commercial efforts to conduct the Nasdaq Listing as soon as practicable, and in any
event within 180 days following the closing (the “Initial Deadline”) and, if the Nasdaq Listing does not occur by
the Initial Deadline, the Company will be entitled to liquidated damages for each 30 days of delay. The liquidated damages, which
range between $20 to $164 depending on the length of the delay, may be paid, at Bonus’ election, in either cash or ordinary
shares of Bonus; (iv) a post-closing covenant by the Company to create, and cause Wize Israel and OcuWize to create, certain first
priority liens in favor of Bonus to secure the Company’s obligations under the Bonus Exchange Agreement, including certain
related negative covenants; and (v) an undertaking by Bonus to cover nearly 50% of the Company’s fees and expenses payable
to H.C. Wainwright & Co., LLC in connection with the transactions contemplated by the Bonus Agreements and the Series B Purchase
Agreement.
Regarding the requirement to release
the remaining escrow amount of $3,700 to the Series B investors subject to Bonus failure to achieve listing in Nasdaq, see below.
According to the Bonus Agreements,
the total number of Bonus Shares issuable to the Company (including the shares to be released at the Milestone Closing) is computed
as the number of ordinary shares of Bonus equal to the quotient obtained by dividing (A) $16,400 expressed in NIS (based on the
exchange rate between NIS and the dollar as of January 8, 2020) by (B) NIS 0.50. As of January 9, 2020, such total number of Bonus
Shares represents (on a post-issuance basis) approximately 12% of the outstanding share capital of Bonus. The fair value of Bonus
Ordinary shares based on a quote of the share price at the date of the agreement and the date of the closing was $0.12 and $0.11,
respectively, per share.
The closing of the transactions contemplated
by the Bonus Agreements was subject to several customary conditions, including (i) approval of the TASE to list the Bonus Shares,
and (ii) the execution by Bonus and the Company of a Registration Rights Agreement (the “Bonus Registration Rights Agreement”),
pursuant to which Bonus will be required to file a resale registration statement (the “Resale Registration Statement”)
with the SEC to register the Bonus Shares for resale, within 30 days following the Nasdaq Listing, and to have the Resale Registration
Statement declared effective within 45 days after the Nasdaq Listing in the event the Resale Registration Statement is not reviewed
by the SEC, or 120 days after the Nasdaq Listing in the event the Resale Registration Statement is reviewed by the SEC.
The transactions contemplated
by the Bonus Agreements was completed on February 19, 2020.
WIZE PHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 5:-
|
SIGNIFICANT TRANSACTIONS (Cont.)
|
As of the date of completion of the
Bonus Agreements, the Company issued 88,011,000 of Bonus ordinary shares. An additional 25,641,000 shares will be released to the
Company upon the listing of Bonus shares on Nasdaq and concurrently with the release of the $3,700 from the escrow account to Bonus.
As the Bonus Shares represent marketable
securities with readily determinable fair value, the shares issued to the Company were recognized upon initial recognition based
on their quoted price (less applicable non-marketability discount) as of the date of the completion of the Bonus Agreement at an
aggregate amount of $8,759. The difference between the fair value of Bonus Shares and the amount of cash that was transferred directly
to Bonus from escrow account was recognized as financial liability, representing Company’s obligation with respect to future
revenues from the LO2A in an amount of $5,059 (see Note 2).
In addition, during the period from
completion of the Bonus Agreements (February 19, 2020) and until March 31, 2020, the Company recognized loss from revaluation of
its investment in Bonus marketable securities in an amount of $2,388 due to the change in the quoted market price of these shares
on TASE. Such amount was presented as part of financial expenses.
The
Mandatorily Redeemable Series B Investment
In order to finance the transactions
contemplated by the Bonus Purchase Agreement, on January 9, 2020, the Company entered into a Securities Purchase Agreement (the
“Series B Purchase Agreement”) with certain accredited investors.
Pursuant to the Series B 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 7,500 shares of newly created Series B Non-Voting Redeemable Preferred Stock, par value $0.001 per share, of the Company
(“Series B Preferred Stock”) for a purchase price of $1 per share, for aggregate gross proceeds under the Series B
Purchase Agreement of $7,500, which funds were deposited into an escrow account, of which (i) $500 was to be paid to the Bonus
Escrow Account and $100 was to be paid to the Company to cover certain of its transactions expenses, in each case, promptly following
the execution of the Series B Purchase Agreement, and (ii) the remaining $6,900 was to be released to the Bonus Escrow Account
upon the closing of the transactions contemplated by the Series B Purchase Agreement (of which, as described above, $3,200 was
to be released upon the earlier of the Milestone Closing or upon written consent of the holders of at least a majority of the Series
B Preferred Stock).
The Series B Purchase Agreement contained customary covenants, representations
and warranties of the parties thereto, including, among others, (i) a covenant by the investors not to transfer the Series B Preferred
Stock without the approval of the Company; (ii) a covenant by the Company, for as long as any Series B Preferred Stock remain outstanding,
not to sell any Bonus Shares for a price per share equal to less than NIS 0.40 (the “Price Restriction”); and (iii)
a covenant by the Company, simultaneously with, or promptly after, the redemption of the Series B Preferred Stock, to assign
certain rights under the Bonus Purchase Agreement, such as the right to liquidated damages in the event of delayed Nasdaq Listing,
and under the Bonus Registration Rights Agreement to the investors.
WIZE PHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 5:-
|
SIGNIFICANT TRANSACTIONS (Cont.)
|
In connection with the Series B Purchase
Agreement, the Company agreed to file, at the closing, a Certificate of Designations of Series B Non-Voting Redeemable Preferred
Stock with the Secretary of State of Delaware (the “Series B Certificate of Designations”). Pursuant to the Series
B Certificate of Designations, the Company designated 7,500 shares of preferred stock as Series B Preferred Stock. The Series B
Preferred Stock are not convertible into shares of Common Stock of the Company and have no voting powers, except as related to
certain rights to protect the rights and preferences of the Series B Preferred Stock and with respect to sales or dispositions
of the Series B Preferred Stock at a price per share below the Price Restriction. The Series B Preferred Stock entitles its holders
to (i) 80% of the proceeds received by the Company through future sales of the Bonus Shares issued to the Company under the Bonus
Agreements and (ii) 80% of any cash dividends received by the Company on such Bonus Shares. Under the Series B Certificate of Designations,
the Company has the option to redeem the Series B Preferred Stock at any time by distributing to holders of the Series B Preferred
Stock (i) 80% of the Bonus Shares then held by the Company and (ii) 80% of all dividends received by the Company but not yet paid
to holders of the Series B Preferred Stock (the “Redemption Payment”). The Company is required to redeem the Series
B Preferred Stock through payment of the Redemption Payment upon the earlier of (i) 60 days following the Nasdaq Listing of the
Bonus Shares, and (ii) December 28, 2020.
However, until the completion of the
listing of Bonus Ordinary shares in Nasdaq, an amount of $3,700 shall remain in escrow account upon the failure of such listing
by Bonus, such amount shall be required to be released in its entirely to the Series B investors.
As of the completion date (February
19, 2020), the Company recognized a liability in respect to its obligation to the mandatorily redeemable Series B Preferred Stock
at its fair value in an amount of $10,707, representing the sum of the remaining escrow amount of $3,700 and 80% of the Company’s
investment in Bonus marketable shares, see Note 2.
The difference between the amount of
the liability recognized with respect to the mandatorily redeemable Series B Preferred Stock ($10,707) and the cash amount actually
invested by such preferred stock investors ($7,500), amounting to $3,207 was recognized immediately as part of financial income
(loss), net upon the completion of the Bonus agreement and the Series B Purchase Agreement, as part of financial expenses.
In addition, from the date of the completion
and until March 31, 2020, the Company recognized a gain in an amount of $1,910 as part of financial income (loss), net due to the
revaluation of the mandatorily redeemable Series B Preferred Stock liability.
WIZE PHARMA, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
U.S. dollars in thousands, except share and per share data
NOTE 6:-
|
FINANCIAL INCOME (EXPENSES), NET
|
|
|
Three months ended
March 31,
|
|
|
2020
|
|
2019
|
|
|
|
|
|
Financial income:
|
|
|
|
|
Gain from extinguishment of convertible loans
|
|
$
|
-
|
|
|
$
|
48
|
|
Revaluation of mandatorily redeemable Series B Preferred Stock
|
|
|
1,910
|
|
|
|
-
|
|
Bank commissions and exchange rate differences
|
|
|
-
|
|
|
|
22
|
|
Amortization of premium related to convertible loans
|
|
|
-
|
|
|
|
767
|
|
|
|
|
|
|
|
|
|
|
Total financial income
|
|
|
1,910
|
|
|
|
837
|
|
|
|
|
|
|
|
|
|
|
Financial expenses:
|
|
|
|
|
|
|
|
|
Accrued interest on convertible loans
|
|
|
-
|
|
|
|
(13
|
)
|
Loss from recognition of mandatorily redeemable Series B Preferred Stock
|
|
|
(3,207
|
)
|
|
|
-
|
|
Change in the fair value of marketable securities
|
|
|
(2,391
|
)
|
|
|
(85
|
)
|
Bank commissions and exchange rate differences
|
|
|
(11
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Total financial expenses
|
|
|
(5,609
|
)
|
|
|
(98
|
)
|
|
|
|
|
|
|
|
|
|
Total financial income (loss), net
|
|
$
|
(3,699
|
)
|
|
$
|
739
|
|