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”).

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, determining the fair value of embedded and freestanding financial instruments related to convertible loans and rights to future investment and the determination whether modification of terms of financial instruments is substantial.

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.

Functional currency:

Prior to the Merger, 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 was changed into 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) were reported in other comprehensive income and are reflected in equity, under “accumulated other comprehensive income (loss)”. As a result of adoption of ASU 2016-01, as discussed in note 2v, accumulated other comprehensive income as of December 31, 2018 consists solely of foreign currency translation adjustment.

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
	2018		2017		2018		2017

USD 1 = NIS		3.748		3.467		8.1		(9.8	)

Cash and cash equivalents:

Cash equivalents are short-term highly liquid investments that are readily convertible to cash with original maturities of three months or less at acquisition.

For presentation of statement of cash flows purposes, restrict cash balances are included with cash and cash equivalents, when reconciling the reported period total amounts.

	December 31
	2017

Cash and cash equivalents	$	215
Restricted cash		12
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	227

There were no restricted cash amounts as of December 31, 2018.

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 was presented at its cost, including accrued interest and represents cash which is used as collateral for Wize Israel’s credit card.

Marketable equity securities:

Until December 31, 2017, the Company’s investment in marketable equity securities was classified as available-for-sale carried at fair value based on the quoted market price, 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 were considered available to be converted into cash to fund Company’s current operations. The Company was required to recognize an impairment charge when a decline in the fair value of its investments in securities was below the cost basis of such securities and was determined to be other than temporary. Factors considered in making such a determination included 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. For securities that were deemed other-than-temporarily impaired, an impairment was recognized as the difference between the cost basis of the impaired equity security and the fair value on the measurement date, as part of financial income, net in the statement of comprehensive loss. The fair value on measurement date was considered the equity security’s new cost basis. As of December 2017, the Company has not recorded loss from impairment.

Commencing January 1, 2018, following the effective date of ASU 2016-01, “Financial Instruments—Overall (Topic 825-10): “Recognition and Measurement of Financial Assets and Financial Liabilities.” (ASU 2016-01), the Company’s investment in marketable equity securities which is based on equity securities with readily determinable fair values was classified as financial instruments at fair value with any changes in fair value recognized periodically in net income.

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

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, 2018 and 2017, no impairment losses have been identified.

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”.

Severance pay:

Wize Israel has two employee as of December 31, 2018 and 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, 2018 and 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, 2018 and 2017 amounted to $10 for both periods.

Income taxes:

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, 2018 and 2017, no liability for unrecognized tax positions has been recognized.

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.

Convertible loans:

Allocation of proceeds:

The proceeds received upon the original issuance of the 2016 Loan 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 related to the 2016 loan was recognized based on its fair value and the remaining amount of the proceeds was allocated to the 2016 Loan component.

Beneficial Conversion Features (“BCF”):

Upon initial recognition, 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 was 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 was amortized as interest expense over the contractual term of the 2016 Loan (before its modification) by using the effective interest method.

Upon initial recognition, 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, did 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.

Furthermore 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.

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.

Following modifications or exchanges of convertible loans that were accounted for as an extinguishment (see below), upon recognition of the convertible loans based on their modified terms, the Company applied ASC 470-20, “Debt – Debt with conversion and other options” to determine whether the conversion feature is considered beneficial to the investors. However, due to the fact that following the extinguishment of the convertible loans, such modified convertible loans were recognized based on their fair value as of the modification date, the conversion terms were not considered beneficial to the investors.

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 under financial expense or income as applicable.

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.

The gain or loss on the extinguishment of the convertible debt instrument is determined based on the difference between the carrying amount and the fair value of 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 excess fair value of the allocated reacquisition price over the fair value of the modified financial instrument before the modification, is recognized directly to retained earnings as a deemed dividend.

Issuance costs of convertible loan:

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 BCF if applicable) 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.

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.

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.

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 (which were classified to equity during 2017) and the financial instruments included under 2017 Loan and 2016 Loan (see note 8) are classified within Level 3.

Following each of the modifications described in Note 8, Wize Israel’s management engaged an external appraiser that measured the fair value of the financial instruments exchanged or modified, as further described in Note 8 and in the following paragraph.

The following tabular presentation reflects the components of the derivative liability associated with rights to future investment during the year ended December 31, 2017:

	Fair value of Right of Future Investment

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	$	-

(*)

Accordingly, the fair value of the Right of Future Investment immediately prior to the Modification Date (December 2017) which amounted to NIS 1,042,000 (approximately $280 according to the exchange rate as of the Modification Date) was reclassified from a derivative liability to additional paid-in capital.

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, 2018, 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.

Treasury shares:

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.

Derivatives:

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 n. above and r. below), and is stated at fair value.

As of December 31, 2018 and 2017, there were no financial instruments required to be accounted as derivatives (see also n. above and r. below).

During the years ended December 31, 2018 and 2017, the Company did not designate any financial instruments for hedging purposes.

Derivative liability for right to future investment:

Upon initial recognition, 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”.

Upon the December 2017 modification, and in accordance with ASC 815-40 “Derivatives and Hedging, Contracts in Entity’s Own Equity”, it was determined that the right to future investment, eligible to be considered as indexed to the Company’s own stock and as a result the derivative liability for right to future investment was reclassified into additional paid-in capital (see also Note 8).

Series A Warrants with Down-Round Protection

Commencing January 1, 2018 and following the early adoption of Accounting Standard Update (ASU) No. 2017-11, “I. Accounting for certain financial instruments with Down Round Features” (ASU 2017-11) as described in Note 2.t, the Company disregard certain down-round features when assessing whether a financial instrument is indexed to its own stock, for purposes of determining liability or equity classification.

Based on its evaluation, management has determined that Series A Warrants (the “Warrants”) that were issued on October 2018, as part of a private placement, as described in Note 12J, which include a down-round protection that would adjust the exercise price of the Warrants based on the price at which the Company subsequently issues shares or other equity-linked financial instruments, if that price is less than the original exercise price of the Warrants, are eligible for equity classification.

In accordance with the provisions of ASU 2017-11, upon the occurrence of an event that triggers a down round protection (i.e., when the exercise price of the Warrants is adjusted downward because of the down round feature), the effect is accounted for as a deemed dividend and as a reduction of income available to common shareholders for purposes of basic earnings per share (EPS) calculation.

During the period from issuance of the Warrants and throughout December 31, 2018, there were no events that require a downward adjustment of the current exercise price of the Warrants.

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. 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 years ended December 31, 2018 and 2017, 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.

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, 2018 and 2017, is as follows:

	Year ended December 31,
	2018			2017

Numerator:
Net loss	$	(3,279	)	$	(2,966	)
Add: Loss attributed to preferred stock (*)		147			-
Less: Deemed dividend with respect to right for future investment	$	(292	)	$	(3	)

Net loss applicable to stockholders of Common Stock	$	(3,424	)	$	(2,969	)

Denominator:
Shares of common stock used in computing basic and diluted net loss per share		5,649,262			3,438,842
Net loss per share of Common stock, basic and diluted	$	(0.61	)	$	(0.86	)

(*) During the year ended December 31, 2018 the Company issued preferred stock as part of the October 2018 transaction. These preferred shares are participating securities as described in Note 12.j. During the years ended December 31, 2018 and 2017 there were no other potentially dilutive instruments.

Accumulated other comprehensive loss:

Accumulated other comprehensive 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 were classified as available-for-sale until December 31, 2017.

The components of accumulated other comprehensive income (loss) as of December 31, 2017 and 2018 were as follows:

	Total accumulated other comprehensive income (loss)

Balance at January 1, 2017	$	(47	)
Cumulative effect adjustment as a result from transition to ASU 2016-01		(26	)

Balance at December 31, 2018	$	(73	)

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.

Until December 31, 2017, ASC 505-50, “Equity-Based Payments to Non-Employees” (“ASC 505”) provisions were 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.

Following the adoption of ASU2018-07 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.

Upon the Closing Date of the Merger (see also Note 1d), all the outstanding options under 2015 Plan of Wize Israel were cancelled.

Disclosure of new accounting standards

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).

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 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 on January 1, 2018. Following the adoption, such investment is accounted for at fair value and the changes in fair value are recognized in net income or loss.

ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting

In June 2018, the FASB issued Accounting Standards 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.

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.

ASU 2018-07 is effective for public business entities in annual periods beginning after 15 December 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 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.

Recent Accounting Pronouncements not adopted yet

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 requires lessees to recognize their leases contracts as assets and liabilities in the financial statements. Furthermore, the ASU requires the Company to continue recognizing expenses but recognize expenses on their income statements in a manner similar to current lease accounting. The amendments in this ASU are effective January 1, 2019. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements, to allow a company to elect an optional modified retrospective transition method that applies the new lease requirements through a cumulative-effect adjustment in the period of adoption. Effective January 1, 2019, the Company intends to adopt the new lease accounting standard using the modified retrospective transition option of applying the new standard at the adoption date. The Company intends to elect the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed the Company to carry forward the historical lease classification.

The Company has completed an initial assessment of the potential impact on its consolidated financial. The actual impact of applying ASU 2016-02 will not be with a significant effect on Company’s consolidated financial statements