NOTE 1:-

GENERAL

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.

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 (see also Note 5).

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 $185.

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”).

For discussion of a financing transaction in October 2018, see also Note 12j.

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 December 31, 2018, the Company has an accumulated deficit of $29,997.

In addition, in the years ended December 31, 2018, and December 31, 2017, the Company reported losses and negative cash flows from operating activities. Furthermore, unless the Company can extend the maturity date, or obtain additional financing, the convertible loans in the aggregate principal amount of $1,353 will become due in May 2019 (refer to note 15).

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.

Risk factors:

As of December 31, 2018, the Company had an accumulated deficit of $29,997. 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;

■ 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.

Merger transaction:

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 (the “Exchange Ratio”) (such number not being converted as per the Reverse Stock Split described in Note 12c) 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 approximately 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 435,053 shares, or approximately 10% of the issued and outstanding Common Stock.

Wize Israel’s ordinary shares were delisted from the Tel Aviv Stock Exchange (“TASE”) 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 in the United States on the over-the-counter (“OTCQB”) under the symbol “WIZP.”

The Merger was accounted for as a reverse recapitalization which is outside the scope of ASC 805, “Business Combinations” (“ASC 805”), as the Company, the legal acquirer, was considered a non-operating public shell, and was 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.

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 of 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.