10-K 1 f10k2020_wizepharmainc.htm ANNUAL REPORT

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2020

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to _____________

Commission File No. 000-52545

Wize Pharma, Inc.
(Exact name of registrant as specified in its charter)
Delaware |  | 88-0445167
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
24 Hanagar Street, Hod Hasharon, Israel |  | 4527708
(Address of principal executive offices) |  | (Zip code)

Registrant’s telephone number, including area code: +972 (72) 260-0536

Securities Registered pursuant to Section 12(b) of the Act: None

Securities Registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, par value $0.001

(Title of each class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer: ☐ | Accelerated filer: ☐
Non-accelerated filer: ☒ | Smaller reporting company: ☒
| Emerging growth company: ☐

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 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was $1,961,169 computed by reference to the price at which the common equity was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter.

As of March 1, 2021, there were 33,052,951 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: NONE

TABLE OF CONTENTS

PART I | 1
Item 1 | Business | 1
Item 1A | Risk Factors | 26
Item 1B | Unresolved Staff Comments | 53
Item 2 | Properties | 53
Item 3 | Legal Proceedings | 53
Item 4 | Mine Safety Disclosures | 53
PART II | 54
Item 5 | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 54
Item 6 | Selected Financial Data | 54
Item 7 | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 55
Item 7A | Quantitative and Qualitative Disclosures About Market Risk | 61
Item 8 | Financial Statements and Supplementary Data | 61
Item 9 | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure | 61
Item 9A | Controls and Procedures | 61
Item 9B | Other Information | 62
PART III | 63
Item 10 | Directors, Executive Officers and Corporate Governance | 63
Item 11 | Executive Compensation | 69
Item 12 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters | 73
Item 13 | Certain Relationships and Related Transactions, Director Independence | 77
Item 14 | Principal Accountant Fees and Services | 77
PART IV | 79
Item 15 | Exhibits, Financial Statement Schedules | 79
Item 16 | Form 10-K Summary | 83
SIGNATURES | 84

i

INTRODUCTION

Throughout this Annual Report, unless otherwise designated, the terms “we”, “us”, “our”, the “Company”, “Wize” and “our company” refer to Wize Pharma, Inc., a Delaware corporation, its wholly-owned Israeli subsidiary, Wize Pharma Ltd. (“Wize Israel”), its wholly-owned Delaware subsidiary, Wize NC Inc. (“Wize NC”), and the wholly-owned subsidiary of Wize NC, OcuWize Ltd. (“OcuWize”).

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 Annual Report are translated using the rate of NIS 3.28 to one U.S. dollar, the exchange rate reported by the Bank of Israel for February 25, 2021.

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 Annual Report reflect the effects of the Reverse Stock Split.

Statements made in this Annual Report concerning the contents of any contract, agreement or other document are summaries of such contracts, agreements or documents and are not complete descriptions of all of their terms. If we filed any of these documents as an exhibit to this Annual Report or to any registration statement or annual report that we previously filed, you may read the document itself for a complete description of its terms, and the summary included herein is qualified by reference to the full text of the document which is incorporated by reference into this Annual Report.

Unless otherwise indicated, information contained in this Annual Report concerning our industry and the markets in which we operate, including our competitive position and market opportunity, is based on information from our own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Management estimates are derived from publicly available information, our knowledge of our industry and assumptions based on such information and knowledge, which we believe to be reasonable. Our management estimates have not been verified by any independent source, and we have not independently verified any third-party information. In addition, assumptions and estimates of our and our industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in Item 1A “Risk Factors” below.

Wize Pharma, Inc.®, the Wize logo and other trademarks or service marks of Wize appearing in this Annual Report are the property of Wize Pharma, Inc. or its subsidiaries. Trade names, trademarks and service marks of other companies appearing in this Annual Report are the property of their respective holders.

IMPORTANT NOTE REGARDING THE PENDING TRANSACTION WITH COSMOS

On December 30, 2020, we entered into a Bid Implementation Agreement (as amended, the “Bid Agreement”) with Cosmos Capital Limited, a digital infrastructure provider based in Sydney, Australia (“Cosmos”). Pursuant to the Bid Agreement, we commenced an off-market takeover offer under applicable Australian laws (the “Offer”), whereby we are offering 61.11 shares of our common stock in exchange for each one outstanding share of Cosmos. Immediately following the Closing Date, and assuming all of the holders of Cosmos Shares accept the Offer, Cosmos shareholders are expected to own approximately 87.65% of the outstanding common stock of Wize, while Wize existing stockholders are expected to remain the owners of approximately 10.75% of the outstanding common stock of Wize, each on a fully diluted basis and including warrants to be issued to Wize’s financial advisor to the transaction.

Pursuant to the Bid Agreement, prior to the Closing Date, Wize will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with Cosmos, certain of Wize’s subsidiaries (the “Wize Subsidiaries”), a person designated by Wize prior to the Closing Date as the Holders’ Representative (as defined herein), and the Rights Agent (as defined therein). Pursuant to the CVR Agreement, at the Closing Date, each Wize pre-Closing securityholder will receive one non-transferable CVR for each outstanding share of common stock of Wize and for each share of common stock of Wize underlying other convertible securities and warrants, held as of 4:01 p.m. Eastern Time on the day immediately before the Effective Time (as defined in the CVR Agreement). Each CVR will represent the right to receive a pro rata share of any consideration that may be received by Wize or the Wize Subsidiaries in connection with Wize’s existing LO2A (as defined below) business. In particular, CVR holders will be entitled to any consideration (whether cash, stock, assets or otherwise) that Wize or the Wize Subsidiaries (or any of its Affiliates or shareholders) receives in connection with an LO2A Transaction, which, as defined in the CVR Agreement, includes (i) a sale of any of the Wize Subsidiaries to a third party and/or (ii) the partnering, licensing, sublicensing, distribution, reselling or sale of all or any part of the LO2A Technology or LO2A Products to a third party, less transaction expenses and customary deductions as detailed in the CVR agreement, including a deduction of up to $300,000 that the Wize Subsidiaries undertook to incur in the development of the LO2A Technology at the request of the Holders’ Representative.

On February 1, 2021, we lodged a Bidder’s Statement with the Australian Securities and Investments Commission to commence the Offer and, on February 16, 2021, we announced that the Offer became unconditional and that we plan to consummate the transactions contemplated by the Bid Agreement and the Offer on or about March 9, 2021.

Unless indicated otherwise by the context, the discussion in this Annual Report regarding our future business plans and activities, including, without limitation, risk factors, does not take into account the effect of the consummation of the Offer and related transactions, including the termination of directors and executive officers contemplated thereunder (collectively, the “Cosmos Transaction”).

For further information on the Cosmos Transaction, including the Bid Agreement, the Offer, the CVR Agreement, the Stock Restriction Agreement, the PIPE Agreements and related transactions, see in “Item 1 – BUSINESS – Overview – Cosmos Transaction” below and our Current Reports on Form 8-K filed with the SEC on January 5, 2021, January 19, 2021 and February 16, 2021, which are incorporated herein by reference.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Annual Report”) 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. Forward-looking statements can be identified by the use of forward-looking words such as “believe”, “expect”, “intend”, “plan”, “may”, “should” or “anticipate” or their negatives or other variations of these words or other comparable words or by the fact that these statements do not relate strictly to historical or current matters. These forward-looking statements may be included in, but are not limited to, various filings made by us with the United States Securities and Exchange Commission (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 Annual Report identifies important factors which could cause our actual results to differ materially from those indicated by the forward-looking statements, particularly those set forth under Item 1A - “RISK FACTORS” below. The risk factors included in this Annual Report 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:

| ● | the timing and anticipated completion of the Cosmos Transaction;
| ● | the expected benefits of and potential value created by the Cosmos Transaction for our stockholders;
| ● | we may 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;

| ● | our current pipeline is based on a single compound known as LO2A (“LO2A”), which is an artificial tear preparation containing 0.015% sodium hyaluronate (“SH”), and on the continuation of our license to commercialize LO2A;

| ● | our inability to expand our rights under our license agreement for LO2A may have a detrimental effect on our business;

| ● | the initiation, timing, progress and results of our preclinical studies, clinical trials and other product candidate development efforts;

| ● | our ability to advance our product candidate into clinical trials or to successfully complete our preclinical studies or clinical trials;

| ● | our receipt of regulatory approvals for our product candidate, and the timing of other regulatory filings and approvals;

| ● | the clinical development, commercialization and market acceptance of LO2A;

| ● | our ability to establish and maintain corporate collaborations;

| ● | the implementation of our business model and strategic plans for our business and product candidate;

| ● | the scope of protection we are able to establish and maintain for intellectual property rights covering LO2A and its ability to operate our business without infringing the intellectual property rights of others;

| ● | estimates of our expenses, future revenues, and capital requirements;

| ● | competitive companies, technologies and our industry;
| ● | the effects of global outbreaks of pandemics or contagious diseases or fear of such outbreaks, such as the recent coronavirus (COVID-19) pandemic, including on our clinical trials, the demand for our products, our ability to operate and on overall economic conditions; and

| ● | statements as to the impact of the political and security situation in Israel on our business.

All forward-looking statements attributable to us or persons acting on our behalf speak only as of the date of this Annual Report and are expressly qualified in their entirety by the cautionary statements included in this Annual Report. We undertake no obligations to update or revise forward-looking statements to reflect events or circumstances that arise after the date made or to reflect the occurrence of unanticipated events. In evaluating forward-looking statements, you should consider these risks and uncertainties.

iii

PART I

ITEM 1. BUSINESS.

Overview

General

We are a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including dry eye syndrome (“DES”). We have in-licensed certain rights to purchase, market, sell and distribute a formula known as LO2A, a drug developed for the treatment of DES, and other ophthalmological illnesses, including Conjunctivochalasis (“CCH”) and Sjögren’s syndrome (“Sjögren’s”). 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.

LO2A is currently registered and marketed by its inventor in Germany and Switzerland for the treatment of DES, in Hungary for the treatment of DES, CCH and ophthalmological symptoms of Sjögren’s and in the Netherlands for the treatment of DES and protection from dry eye as a result of Sjögren’s.

We currently intend to focus on marketing LO2A as a treatment for DES and other ophthalmic inflammations, including CCH and / or Sjögren’s, in the United States, and in additional territories, subject to obtaining the appropriate regulatory file for each such territory and purchasing the rights to market, sell and distribute LO2A in those additional territories (collectively, the “Licensed Territories”). We believe that the potential for the most economic success is in marketing LO2A for the treatment of DES patients suffering from CCH and/or Sjögren’s. The registration process in certain countries, including the United States, requires us to conduct additional clinical trials, in addition to the Phase II clinical trial that we have completed and the Phase IV clinical trial which we completed in May 2020, and with respect to which, we published topline data on November 12, 2020, as described below.

We plan, subject to successful studies results, to engage local or multinational distributors to handle the distribution of LO2A or engage in such other strategic transactions that may monetize our rights in our LO2A licensed technology. In particular, we intend to (i) 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, or (ii) explore other strategic transactions with pharmaceutical companies or others that will monetize our rights in the LO2A licensed technology. However, there is no assurance whether we will be able to consummate any such transactions and, even if we did, what will be the timing or terms thereof.

In November 2018, we completed a phase II multi-center trial at five different medical centers in Israel (the “Phase II Multi-Center Trial”). The Phase II Multi-Center Trial was a randomized, double-blind, placebo-controlled study carried out in parallel groups that evaluated the safety and efficacy of LO2A for patients suffering from moderate to severe CCH. The primary efficacy endpoint for the Phase II Multi-Center Trial was 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 Phase II Multi-Center Trial. In November 2018 we received the top line results for the Phase II Multi-Center Trial which describe analysis of the primary endpoint. 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.

In May 2020, we completed a phase IV multi-center trial at five different medical centers in Israel (the “Phase IV Multi-Center Trial”). The Phase IV Multi-Center Trial evaluated the safety and efficacy of LO2A for symptomatic improvement of DES in 69 adult patients with Sjögren’s. Enrolled patients were randomized in a 1:1 ratio to one of two treatment groups, LO2A or Systane® Ultra UD. The Phase IV Multi-Center Trial was 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. We announced the topline results of such trial on November 12, 2020, as described below.

Cosmos Transaction

On December 30, 2020, we entered into the Bid Agreement with Cosmos, which was subsequently amended on January 18, 2021 for the primary purpose of simplifying the Offer structure. Under the Bid Agreement (as amended), the parties agreed that Wize would commence the Offer, an off-market takeover offer under applicable Australian laws, to acquire all of the Cosmos Shares in exchange for 61.11 Wize shares of common stock for each Cosmos Share, being the Offer Consideration.

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Under the Bid Agreement, 22.33 Wize shares of common stock out of the Offer Consideration will be “Restricted Stock” subject to a Stock Restriction Agreement to be entered into at the Closing Date and 38.78 Wize shares of common stock will be “Covered Securities”. A Cosmos shareholder who accepts the Offer (an “Accepting Shareholder”) will not be permitted to sell or encumber their Restricted Stock until December 31, 2021 (the “Milestone Date”). In addition, an Accepting Shareholders may not exercise voting rights in respect of Restricted Stock from the date of issuance of the Offer Consideration until the Milestone Date. An Accepting Shareholder is entitled to sell or encumber its Covered Securities. However, if (subject to certain limited exceptions) an Accepting Shareholder sells or encumbers any of its Covered Securities before the Milestone Date, Wize has an option to repurchase a pro rata proportion of the Restricted Stock for the lower of $0.0001 and the fair market value of the Restricted Stock. The Restricted Stock (and any dividends thereon) will be held by Wize in escrow for the Accepting Shareholder’s benefit until such time as the Restricted Stock is repurchased by Wize or all restrictions thereon lapse. If any Restricted Stock is repurchased under Wize’s repurchase option, a pro rata proportion of the dividend on the Restricted Stock shall be retained by Wize. The Offer Consideration, comprising the Restricted Stock and the Covered Securities, will be exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”) pursuant to Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder because, among other things, the transaction did not involve a public offering, the investors are accredited investors, the investors are taking the securities for investment and not resale and the Company took appropriate measures to restrict the transfer of the securities, and pursuant to Regulation S of the Securities Act to non-U.S. investors

Immediately following the Closing Date, and assuming all of the holders of Cosmos Shares accept the Offer, Cosmos shareholders are expected to own approximately 87.65% of the outstanding common stock of Wize, while Wize existing stockholders are expected to remain the owners of approximately 10.75% of the outstanding common stock of Wize, each on a fully diluted basis and including warrants to be issued to Wize’s financial advisor to the transaction.

Pursuant to the Bid Agreement, prior to the Closing Date, Wize will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with Cosmos, certain of Wize’s subsidiaries (the “Wize Subsidiaries”), a person designated by Wize prior to the Closing Date as the Holders’ Representative (as defined herein), and the Rights Agent (as defined therein). Pursuant to the CVR Agreement, at the Closing Date, each Wize pre-Closing securityholder will receive one non-transferable, on a contractual basis only, contingent value right (“CVR”) for each outstanding share of common stock of Wize and for each share of common stock of Wize underlying other convertible securities and warrants, held as of 4:01 p.m. Eastern Time on the day immediately before the Effective Time (as defined in the CVR Agreement). Each CVR will represent the right to receive a pro rata share of any consideration that may be received by Wize or the Wize Subsidiaries in connection with Wize’s existing LO2A business. In particular, CVR holders will be entitled to any consideration (whether cash, stock, assets or otherwise) that Wize or the Wize Subsidiaries (or any of its Affiliates or shareholders) receives in connection with an LO2A Transaction, which, as defined in the CVR Agreement, includes (i) a sale of any of the Wize Subsidiaries to a third party and/or (ii) the partnering, licensing, sublicensing, distribution, reselling or sale of all or any part of the LO2A Technology or LO2A Products to a third party, less transaction expenses and customary deductions as detailed in the CVR agreement, including a deduction of up to $300,000 that the Wize Subsidiaries undertook to incur in the development of the LO2A Technology at the request of the Holders’ Representative.

The Bid Agreement also contains certain covenants to be performed at or following the Closing Date, including, among others, (i) agreement that the Board of Directors of Wize immediately following the Closing Date will consist, subject to certain exceptions, of three members to be designated by Cosmos and one member to be designated by Wize; (ii) covenants that Wize will seek, following the Closing Date, stockholder approval to be renamed Cosmos Capital, Inc. (or similar name), and to effect a reverse share split of Wize’s common stock; (iii) covenants that Wize will establish an incentive compensation program with respect to 40,000,000 shares of its common stock, to be granted promptly following the Closing Date, in the form of performance-based RSUs, performance rights or indeterminate rights based on the performance milestone criteria and allocation set in the Bid Agreement (the “Post-Closing Incentive Plan”), 50% of which are to be granted to personnel specified by Wize prior to the Closing Date and the remainder to be granted to personnel of Cosmos (see also Item 9B below); (iv) an obligation by Wize to terminate or procure the termination of each of the current employment or consulting agreements of Wize with Mr. Mark Sieczkarek, the Chairman of Wize Board of Directors, Mr. Noam Danenberg, the Chief Executive Officer of Wize, Mr. Or Eisenberg, the Chief Financial Officer of Wize, and another part-time employee related to Mr. Danenberg; and (v) an obligation by Wize to use its reasonable commercial efforts to enter into new, part time, consulting agreements with Mr. Danenberg and Mr. Eisenberg in a form to be agreed between Wize and Cosmos. In this respect, it should be noted that Wize, Cosmos and each of Mr. Danenberg and Mr. Eisenberg agreed on the form of such consulting agreements, whereby Mr. Danenberg and Mr. Eisenberg will provide part time consulting services to Wize following the Closing Date for monthly compensation of US$10,000 and US$7,500, respectively.

Concurrently with the execution of the Bid Agreement, we entered into Securities Purchase Agreements (the “PIPE Agreements”) with certain accredited investors (the “PIPE Investors”), including Mr. Noam Danenberg, our CEO. Pursuant to the PIPE Agreements, we agreed to sell to the PIPE Investors, and the PIPE Investors agreed to purchase from us, in a private placement, an aggregate of 25,000,000 shares of common stock for a purchase price of $0.12 per share, or aggregate gross proceeds of $3.0 million, which, in the case of Mr. Danenberg, may be satisfied by waiving outstanding amounts owed by the Company or its subsidiaries to Mr. Danenberg pursuant to his consulting agreement with our subsidiary.

On February 1, 2021, we lodged a Bidder’s Statement with the Australian Securities and Investments Commission to commence the Offer and, on February 16, 2021, we announced that the Offer became unconditional and that we plan to consummate the transactions contemplated by the Bid Agreement and the Offer on or about March 9, 2021.

Unless indicated otherwise by the context, the discussion in this Annual Report regarding our future business plans and activities does not take into account the effect of the consummation of the Offer and related transactions (collectively, the “Cosmos Transaction”).

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For further information on the Cosmos Transaction, including the Bid Agreement, the Offer, the CVR Agreement, the Stock Restriction Agreement, the PIPE Agreements and related transactions, see our Current Reports on Form 8-K filed with the SEC on January 5, 2021, January 19, 2021 and February 16, 2021, which are incorporated herein by reference.

The Bonus/LO2A Transaction

See the information under “ITEM 7 – Liquidity and Capital Resources – The Bonus/LO2A Transaction.”

Series B Preferred Stock and Redemption

See the information under “ITEM 7 – Liquidity and Capital Resources – Series B Preferred Stock and Redemption.”

Copernicus

On September 4, 2019, the Company entered into an exclusive license agreement with Copernicus Therapeutics, Inc. (“Copernicus”), a U.S.-based privately held gene therapy company (the “Copernicus License Agreement”). The execution of the Copernicus License Agreement and the grant of license are subject to the satisfaction of certain customary closing conditions, including the completion of a due diligence investigation of Copernicus and its technology to our satisfaction. As of today, this license agreement was not executed, and we view this agreement as terminated, although we have reserved $50,000 as a possible payment to Copernicus which was never made.

Corporate Information

On May 21, 2017, we entered into an Agreement and Plan of Merger (as amended, the “2017 Merger Agreement”), with Bufiduck Ltd., a company formed under the laws of the State of Israel and our wholly owned subsidiary (the “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 “2017 Merger”). The 2017 Merger was consummated on November 15, 2017.

Our corporate headquarters are located in Hod Hasharon, Israel. Our telephone number is +(972)-72-2600536, and our website address is www.wizepharma.com. The 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 Annual Report, and is not a part of this report.

The Market Opportunity

We, through OcuWize, 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, and have an option to purchase the rights to additional territories as further described below under “Item 1. BUISNESS — LO2A License Agreement” below.

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 GlobalData DES report (the “GlobalData Report”), it was estimated that in 2016, pharmaceutical sales within the DES market were approximately $2.2 billion across the 8 major markets, with the United States contributing 79.6% of these sales, and GlobalData expects that by 2026 those sales are expected to grow to $5.6 billion. According to the GlobalData Report, the major drivers of growth of DES include the introduction of novel drugs, an increasingly aging society and increasing urbanized living with greater use of computers and better disease awareness leading to increased diagnosis and treatment rates. In addition, extended viewing of television, computer and smartphone screens, weather conditions, exposure to air conditioning and increased life expectancy are additional factors that contribute to the increase in the number of those suffering from DES.

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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 Ltd., a company controlled by Professor Shabtay Dikstein, the inventor of LO2A (“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 EU, 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 EU 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 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 or may accompany another autoimmune diseases, such as lupus, rheumatoid arthritis, or scleroderma, thus termed secondary Sjögren’s. 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.

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Estimations of Sjögren’s prevalence vary from 2.5 million to 4 million patients (Sjögren’s Syndrome Foundation) in the United States alone, with a worldwide estimate of up to 7.7 million in the seven major markets (United States, France, Germany, Italy, Spain, the UK and Japan) by the year 2024 (Global Data Report). 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 United States and the EU in 2021 and Japan in 2022.

LO2A License Agreement

In May 2015, Wize Israel entered into an Exclusive Distribution and Licensing Agreement with Resdevco (as amended, the “LO2A License Agreement”). In August 2016, Wize Israel and Resdevco entered into an agreement pursuant to which Wize Israel assigned all of its rights and obligations under the LO2A License Agreement to OcuWize. Pursuant to the LO2A 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.

The LO2A License Agreement also grants Wize Israel the right to purchase Resdevco’s agreements with its existing distributors of LO2A in Germany, Hungary, Netherlands and Switzerland (the “Reserved Territories”) for (10) ten times the greater of the net royalties received in the previous twelve (12) months 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, subject to the payment of royalties to Resdevco. 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 as well as certain minimum royalty payments.

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 twelve (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, subject to certain conditions, including, a 180 days prior notice to Resdevco, and penalty payment of $100,000, depending on the timing of termination. The LO2A License Agreement may also 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.

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.

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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 would be limited to one year if by September 6, 2018, Wize Israel had not signed a distribution agreement for LO2A in China.

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 Chinese Distribution Agreement, that the Chinese Distributor will transfer the Chinese market license to Resdevco upon termination of the distribution agreement. On May 31, 2018, we entered into an Exclusive Distribution Agreement with HPGC Medical Co., Ltd. (the “Chinese Distributer”), pursuant to which the Chinese Distributor will distribute LO2A in China (the “Chinese Distribution Agreement”). Although the Chinese Distribution Agreement is in force, we have not started yet to operate in the Chinese market.

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. The MOU provides that it will terminate by June 30, 2019 if the Company has not completed certain clinical trials by such date. The Company did not complete such trials within such time period, and the MOU terminated.

On November 8, 2019, Wize Israel entered into an amendment to the LO2A License Agreement with Resdevco (the “Resdevco Amendment”). Pursuant to the terms and subject to the conditions set forth in the Resdevco Amendment, the royalties payable by Wize Israel to Resdevco shall be reduced from $475,000 per year to $150,000 per year for the years ended 2019 and 2020. Further, the Resdevco Amendment provides that a one-time payment to Resdevco by Wize Israel in an amount of $650,000 shall be due no later than the second anniversary of the receipt of FDA approval (the “Deferred Amount”); however, following the Food and Drug Administration (“FDA”) approval, if annual royalties due to Resdevco by Wize Israel exceed the Minimum Royalties (as defined in the License Agreement), an amount equal to 50% of such excess shall be added towards settlement of the Deferred Amount. As to royalty payments, the Resdevco Amendment provides that Resdevco shall be entitled to the greater of $.60, or a percentage of revenues, not to exceed 10%, from sales made in the United States and other countries, excluding Israel, China and Ukraine with a minimum of the Minimum Royalties. The Resdevco Amendment further provides that Resdevco may terminate the License Agreement upon 30-days’ written notice if certain regulatory and/or sales milestones are not met within certain specified dates.

On May 4, 2020, we, OcuWize and Resdevco entered into a further amendment to the License Agreement, whereby the parties agreed, among other things, that if (i) within 3 months after we receive a pre-Investigational New Drug (“IND”) with respect to the LO2A, or (ii) in case of proven inability to receive such Pre-IND as a direct result of the COVID-19, in both cases not later than December 31, 2021, we provide Resdevco with a written termination notice, the License Agreement shall be terminated immediately, and to the extent we exercise such termination right before the end of 2021, no minimum royalty fee shall be due for the year 2022.

The Company has determined not to pursue currently any activities outside the USA until the Company will obtain from Resdevco satisfactory registration file including DES and at least one more indication such as CCH or Sjögren’s. The Company seeks to approve a proposed regulatory strategy acceptable to the Chinese market based on the regulatory files once provided.

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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% 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.

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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, CCH and Sjögren’s 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 (the “Approved Territories”). 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 currently 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 our completed Phase II and Phase IV clinical trials.

We plan, subject to successful studies results, to engage local or multinational distributors to handle the distribution of LO2A or engage in such other strategic transactions that may monetize our rights in our LO2A licensed technology. In particular, we intend to (i) 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, or (ii) explore other strategic transactions with pharmaceutical companies or others that will monetize our rights in the LO2A licensed technology. However, there is no assurance whether we will be able to consummate any such transactions and, even if we did, what will be the timing or terms thereof.

Our Clinical Trials

In November 2018, we completed a multi-center trial at five different medical centers in Israel (the “Multi-Center Trial”). The Multi-Center Trial was a Phase II randomized, double-blind, placebo-controlled study carried out in parallel groups that evaluated the safety and efficacy of LO2A for patients suffering from moderate to severe CCH. The primary efficacy endpoint for this study was 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.

In November 2018, we received the top line results for the Multi-Center Trial which describe analysis of the primary endpoint. 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.

In March 2018, we commenced our 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 took place in Israel and evaluated the safety and efficacy of LO2A for symptomatic improvement of DES in 60 adult patients with Sjögren’s. In January 2020, we enrolled our last patient to the study. Patients were randomized in a 1:1 ratio to one of two treatment groups, LO2A or Systane® Ultra UD. Drops are 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 was 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. Data obtained from this study 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.

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On November 12, 2020, we announced topline results from the Phase IV clinical trial. The randomized, double-masked comparative study evaluated LO2A versus Alcon’s Systane® Ultra UD (“comparator”), an over-the-counter lubricant eye drop product used to relieve dry and irritated eyes in DES patients, which is also used to treat dry eye in patients with Sjögren’s syndrome.

The study design included 69 patients (138 eyes) with Sjögren’s syndrome experiencing DES that were randomized in a 1:1 ratio into two treatment groups, LO2A or Systane® Ultra UD. Drops were administered topically to the eye over a 3-month period.

The primary endpoint of the study was change in corneal staining score, using the National Eye Institute (NEI) Industry Grading System after 3 months of study treatment. This is an objective measure used to determine the severity of the damage caused by dryness of the eye (referred to as “sign”).

Secondary endpoints included a conjunctival staining score after one month of treatment and changes in quality of life with subjective questionnaires, including Ocular Surface Disease Index (OSDI) and Visual Analogue Scale (VAS) score after one and three months of treatment (referred to as “symptoms”). Clinically significant results were defined as a reduction of 3 points in corneal and conjunctival staining and an improvement of 30 points in VAS and of 10 points in OSDI measurements.

The topline results consisted of the following:

| ● | LOA2 met its primary endpoint of non-inferiority vs. comparator at the 3-month time point in corneal staining with a p value of 0.001.

| ● | LO2A continued, as in prior trials, to demonstrate a good safety profile with no major adverse events or side effects reported.

| ● | A numeric advantage was evident in both the signs and symptoms of DES for patients using LO2A vs. the comparator in the subgroup of patients with primary Sjögren’s (11 and 17 patients with primary Sjögren’s were in the LO2A and Control groups, respectively).

| ● | LO2A demonstrated clinically meaningful improvement in both the signs and symptoms of DES in patients suffering from Sjögren’s - 100% of the patients treated with LO2A showed a clinically significant improvement in at least one of the primary and secondary end point measurements included in the trial at the 3-month time point vs. 90% of patients treated with comparator. In addition, among the LO2A treatment group, 74% of patients showed a clinically significant improvement in both signs and symptoms vs. 59% in the comparator group.

| ● | For the subset of patients with primary Sjögren’s, average conjunctival staining at the 3-month time point was reduced on average by 4.1 points by LO2A, compared to an average reduction of 2.7 points by the comparator, marking about a 52% difference.

| ● | For the subset of patients with primary Sjögren’s, there was an average reduction of 37.4 points in the eye dryness score measured by VAS in the group treated by LO2A, compared to an average reduction of 21.4 points in the comparator group at the 3-month time point, resulting in approximately a 75% difference.

Research and development expenses for the year ended December 31, 2020 were approximately $434,000 compared with approximately $492,000 for the year ended December 31, 2019.

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Clinical Data

The safety and efficacy of LO2A has been shown in several clinical trials, conducted by Prof. Dikstein, the inventor of LO2A. The following paragraphs describe the clinical and non-clinical data upon which approvals were granted in the Approved Territories.

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.

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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.

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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.

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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 consider our ability 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.

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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 current Good Manufacturing Practices (“cGMP”), as required by the FDA, 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 to market LO2A and receive orders from the distributors (for more information, see “Item 1. BUISNESS — Marketing, Sales and Distribution”).

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. The registration process in certain countries, including the United States, requires us to undertake additional clinical trials, in addition to the completed Phase II and Phase IV clinical trials that we completed.

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.

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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.

To the best of our knowledge, 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 U.S. 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 Annual Report.

The use of LO2A for treating or alleviating CCH is protected by the patent family of International Patent Application WO2012150583, filed on April 5, 2012, assigned to Resdevco, entitled EYE DROPS FOR TREATMENT OF CONJUNCTIVOCHALASIS. Corresponding members include U.S. Patent No. 8,912,166, Israeli Patent No. 212725, Japanese Patent No. 5957517 and European Patent No. 2704747. Patents 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 the patent family of International Patent Application WO2018163151, filed on February 19, 2018, assigned to Resdevco, entitled EYE DROPS FOR TREATMENT OF IRRITATION NOT DUE TO INFECTION. Corresponding patent applications are pending in the USA, Europe, China and other countries. Patents to issue will expire, without extension, in 2038.

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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” below.

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.

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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 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 a new drug application (“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.

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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.

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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 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 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.

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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

We do not currently have license or right to distribute in countries in the European Union (“EU”). Although we are not currently seeking regulatory approval in the 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 (“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.

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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:

| ● | the mutual-recognition procedure, whereby a marketing authorization granted in one Member State can be recognized in other EU countries; or

| ● | the decentralized procedure, whereby a medicine that has not yet been authorized in the EU can be simultaneously authorized in several EU Member States.

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 Annual 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.

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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 GCP 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:

| ● | having the same qualitative and quantitative composition in active substance as the reference medicinal product;

| ● | having the same pharmaceutical form as the reference medicinal product; and

| ● | 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.

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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.

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Other Countries

In addition to regulations in the United States and the EU, 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 EU 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 EU 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 part time (80%) consultant (our CEO) and two full time employees (our CFO and one other employee who is the daughter of our CEO). In addition, from time to time, we engage certain outside consultants that are, in general, compensated on an hourly basis, with compensation taking the form of both cash and share-based payments.

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ITEM 1A. RISK FACTORS.

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 Annual Report, including the matters addressed in the section entitled “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS” beginning on page iii of this Annual Report, 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.

Summary of Risk Factors

Our business is subject to a number of risks, including risks that may adversely affect our business, financial condition and results of operations. These risks are discussed more fully below and include, but are not limited to, risks related to:

Risks Related to the Cosmos Transaction

| ● | the timing, and perceived benefits of, the Cosmos Transaction;
| ● | the likelihood of entering into an LO2A Transaction or stockholders obtaining any benefit from owning a CVR;
| ● | the interests some of our officers and directors may have in the Cosmos Transaction;
| ● | our stockholder’s reduced ownership as a result of the Cosmos Transaction;
| ● | the difficulty in valuing Cosmos;
| ● | the potential need to raise funds in the future, if the Cosmos Transaction is consummated;
| ● | the impact to our business if we are required to register under the Investment Advisors Act of 1940, as amended;

Risks Related to our Business

| ● | the fact that we have incurred operating losses and may continue to do so for the foreseeable future;

| ● | our exposure to fluctuations in the market value of our investments;

| ● | that we may need to raise additional capital, which may be required to maintain or improve our licensed technology which may cause dilution to existing stockholders;

| ● | that according to management estimates, liquidity resources as of December 31, 2020 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;

Risks Related to our Business and Regulatory Matters

| ● | the we may never become profitable and that we may never commercialize LO2A;

| ● | the timing and expense of our clinical trials, and the regulatory requirements relating to LO2A;

| ● | the expense of potentially acquiring or licensing additional technologies or product candidates;

| ● | our reliance on third party manufacturers;

| ● | the lack of any sales, marketing or distribution capabilities;

| ● | competition and technological challenges we may face;

| ● | the impact of COVID-19;

| ● | growth challenges we may face;

| ● | our need to obtain and keep adequate insurance;

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Risks Related to our Intellectual Property

| ● | our reliance on the LO2A License Agreement and the potential need to expand our rights under such agreement;

| ● | our need to obtain and maintain patents and intellectual property, the costs relating to maintain such patents and intellectual property, and the cost of enforcing and litigation such patents and intellectual property;

| ● | our reliance on confidentiality agreements;

Risks Related to our Industry

| ● | our subject to government regulations;
| ● | the impact of healthcare reforms on our business and reimbursements;

Risks Related to Our Common Stock

| ● | the impact of our business successes or failure on the value of our Common Stock;

| ● | the difficulty stockholders may face as a result of our status as a former “shell company” and that are Common Stock may be a “penny stock”;
| ● | the impact of future stock sales on our stock price;
| ● | the concentration of stock ownership limiting the ability of stockholders to influence us;
| ● | the potential lack of liquidity, or volatility, of our common stock and warrants;
| ● | the potential failure to maintain effective internal controls over financial reporting;
| ● | the existence of anti-takeover provisions in our charter documents and Delaware law;
| ● | that we do not intend to pay dividends on our common stock;

Risks Related to our Operations in Israel

| ● | the risks relating to the political, economic and military instability that may exist in Israel;
| ● | the potential for operations to be disrupted as a result of obligations of Israeli citizens to perform military service; and
| ● | the difficulty in enforcing judgements against us or certain of our executive officers and directors.

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Risks Related to the Cosmos Transaction

The Cosmos Transaction may not be completed at all or in the anticipated timeframe.

The completion of the Cosmos Transaction is no longer subject to the closing conditions because we declared the Offer unconditional, but we cannot assure you that the transaction will occur as planned or that it will not be delayed past our expected closing date of March 9, 2021.

We may not achieve the perceived benefits of the Cosmos Transaction and the market price of our common stock following the Cosmos Transaction may decline.

The market price of our common stock may decline as a result of the Cosmos Transaction for a number of reasons, including if: investors react negatively to the prospects of the combined company’s business; the effect of the Cosmos Transaction on the combined company’s business and prospects is not consistent with the expectations of our management or of financial or industry analysts; or the combined company does not achieve the perceived benefits of the transaction as rapidly or to the extent anticipated by our management or financial or industry analysts.

There can be no assurance that we will successfully enter into any LO2A Transaction or, if we do, that such LO2A Transaction will ultimately be successful or that any CVR payments will be made.

There are numerous risks and uncertainties associated with the entitlement to payment under the CVR Agreement. We are currently exploring potential LO2A Transactions with third parties. If and when such discussions materialize and, thereafter, negotiations are successfully concluded, we may enter into a transaction for the sale or licensing of the LO2A Technology to such third party. Any proceeds that we receive in connection with a LO2A Transaction, will be distributed in accordance with the CVR Agreement. If no LO2A Transaction is entered into within the first two years of the closing of the Cosmos Transaction, then we may continue or terminate the LO2A program, in our discretion, and are not required to effect any LO2A Transaction. The CVR will terminate automatically upon such LO2A program termination. There can be no assurance that we will successfully enter into any LO2A Transaction or, if we do, that such LO2A Transaction will ultimately be successful or that any CVR payments will be made. In addition, the CVRs are not freely transferable and will not be registered with the SEC or listed on any securities exchange. Also, the tax consequences regarding the receipt of the CVRs are uncertain.

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The Cosmos Transaction may be completed even though certain events occur prior to the closing that materially and adversely affect Wize or Cosmos.

The Bid Agreement provides that either Wize or Cosmos can refuse to complete the transactions contemplated thereunder if there is a material adverse change affecting the other party between December 30, 2020, the date of the Bid Agreement, and the closing. However, since we have declared the Offer unconditional and are expecting the closing to occur on or about March 9, 2021, material adverse changes generally do not permit either party to refuse to complete the transaction.

Some of our officers and directors have interests in the Cosmos Transaction that are different from those of our stockholders.

Certain of our officers and directors participate in arrangements that provide them with interests in the Cosmos Transaction that are different from, or in addition to, the interests of our stockholders. These interests include acceleration of vesting of unvested stock options and RSUs of our directors and executive officers; indemnification and insurance of our directors and executive officers; change in control provisions of employment and consultation arrangements of our chief executive officer and chief financial officer; termination of existing consulting and employment agreements with our chief executive officer and chief financial officer, respectively, and execution of new consulting arrangements with our chief executive officer and chief financial officer; participation of our chief executive officer and chief financial officer in the Post-Closing Incentive Plan; and participation of our chief executive officer in the PIPE Agreements. The members of our Board of Directors were aware of these additional interests, and considered them, when they approved the Bid Agreement.

Cosmos is not a publicly traded company, making it difficult to determine the fair market value thereof.

The outstanding share capital of Cosmos is not traded on any public market, which makes it difficult to determine the fair market value of Cosmos. There can be no assurance that the consideration to be issued to Cosmos shareholders will not exceed the actual value of Cosmos.

Our securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the closing as compared to their current ownership and voting interest in our company.

If the Cosmos Transaction is completed, our current securityholders will own a smaller percentage of the combined company than their current ownership in Wize. Immediately following the Closing Date, and assuming all of the holders of Cosmos Shares accept the Offer, Cosmos shareholders are expected to own approximately 87.65% of the outstanding common stock of Wize, while Wize existing stockholders are expected to remain the owners of approximately 10.75% of the outstanding common stock of Wize, each on a fully diluted basis and including warrants to be issued to Wize’s financial advisor to the transaction. Consequently, our stockholders as a group will have less influence over the management and policies of the combined company after the Cosmos Transaction.

Our stockholders may not realize a benefit from the Cosmos Transaction commensurate with the ownership dilution they will experience in connection with the transaction.

If the combined company is unable to realize the strategic and financial benefits currently anticipated from the Cosmos Transaction, our stockholders will have experienced substantial dilution of their ownership interests without receiving the expected commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the expected strategic and financial benefits currently anticipated from the transaction.

The combined company may need to raise additional capital by issuing securities or debt or through licensing or other strategic arrangements, which may cause dilution to the combined company’s stockholders or restrict the combined company’s operations or impact its proprietary rights.

The combined company may be required to raise additional funds sooner than currently planned. If either or both of Wize or Cosmos hold less cash at the time of the closing than the parties currently expect, the combined company will need to raise additional capital sooner than expected. Additional financing may not be available to the combined company when it needs it or may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, such an issuance may cause significant dilution to the combined company’s stockholders’ ownership and the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing, partnering or other strategic arrangements, it may be necessary to relinquish rights to some of the combined company’s technologies or proprietary rights, or grant licenses on terms that are not favorable to the combined company.

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During the pendency of the Cosmos Transaction, we may not be able to enter into a business combination with another party at a favorable price because of restrictions in the Bid Agreement.

Covenants in the Bid Agreement impede our ability to make acquisitions or solicit alternative change of control transactions, subject to certain exceptions. In addition, while the Bid Agreement is in effect, we are generally prohibited from soliciting, initiating, encouraging or entering into certain extraordinary transactions, such as a merger, sale of assets, or other business combination with any third-party that would be inconsistent with the transaction. Any such transactions could be favorable to our stockholders.

Failure to complete the Cosmos Transaction may result in our having to paying a termination fee to Cosmos and could significantly harm the market price of our common stock and negatively affect our future business and operations of each company.

If the Cosmos Transaction is not completed and the Bid Agreement is terminated under certain circumstances, we may be required to pay Cosmos a termination fee of $150,000. Even if a termination fee is not payable in connection with a termination of the Bid Agreement, we will have incurred significant fees and expenses, most of which must be paid whether or not the transaction is completed. Further, if the Cosmos Transaction is not completed, it could significantly harm the market price of our common stock.

In addition, if the Bid Agreement is terminated and our board of directors determines to seek another business combination, there can be no assurance that we will be able to find a partner and close an alternative transaction on terms that are as favorable or more favorable than the terms set forth in the Bid Agreement.

Our business and financial condition will be materially adversely affected if we are required to register as an investment company under the Investment Company Act.

Wize is not, and does not intend to become, an “investment company” as defined in the U.S. Investment Company Act of 1940, as amended (the “Investment Company Act”). Currently, Wize relies on the exclusion from the definition of “investment company” afforded by Rule 3a-2 under the Investment Company Act. In this regard, Wize has undertaken measures, including through the sale of the Bonus Shares, to ensure that it is compliant with the conditions for relying on this rule, within the time period permitted by Rule 3a-2. If Wize is not able to comply within the time period permitted by Rule 3a-2 and as extended by the staff of the SEC in a few no-action letters, Wize may be required to register as an “investment company” under the Investment Company Act or cease operations. In addition, even if Wize were to successfully comply with the requirements of Rule 3a-2, there is a risk that, following the Closing Date, Wize (as the combined company that engages, through Cosmos, in the business of developing blockchain infrastructure, including particularly the hosting and ownership of application-specific integrated circuit (ASIC) hardware, and in activities related to cryptocurrency mining (mainly bitcoin)), may be required to register as an “investment company” if the SEC or a court were to take the position that cryptocurrencies of the types that the combined company may hold are “securities,” as defined in the Investment Company Act.

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Although the SEC and courts are providing increasing guidance on the treatment of cryptocurrencies for purposes of federal securities law, this continues to be an evolving area of law. Therefore, it is possible that the SEC or a court could take a position that may be adverse to the position Wize has taken, or the combined company intends to take, on these matters. If Wize were required to register as an investment company but fails to do so, the consequences may be severe. Among the various remedies it may pursue, the SEC may seek an order of a court to enjoin Wize from continuing to operate as an unregistered investment company. In addition, all contracts that Wize has entered into in the course of its business, including securities that it has offered and sold to investors, will be rendered unenforceable except to the extent of any equitable remedies that might apply. An affected investor in such case may pursue the remedy of rescission. If Wize were to register as an investment company, it may be forced to significantly change its structure and operations in order to comply with the substantive requirements of the Investment Company Act. In particular, Wize may be forced to change its capital structure in order to satisfy the limits on leverage and classes of securities imposed by the Investment Company Act, modify the composition of its board of directors in order to maintain the required number of independent directors and the requirements of “independence” set forth in rules under the Investment Company Act, restrict transactions that it may engage in with affiliated persons, fair value its assets in the manner required by the Investment Company Act, adopt a code of ethics to comply with restrictions on personal trading by officers and employees of Wize, etc. Compliance with the requirements of the Investment Company Act applicable to registered investment companies may make it difficult for Wize to continue its current operations or, following the Closing Date, its operations as a company that is engaged in the business of developing blockchain infrastructure and in activities related to cryptocurrency mining.

Litigation relating to the Cosmos Transaction could require us to incur significant costs and suffer management distraction, and could delay or enjoin the transaction.

We could be subject to demands or litigation related to the Cosmos Transaction, whether or not it is consummated. Such actions may create uncertainty relating to the transaction, or delay or enjoin it, result in substantial costs to us and divert management time and resources.

Risks Related to our Business

Our business has been primarily dependent on the success of our in-licensed LO2A. If the Cosmos Transaction is not completed, our business will continue to be dependent on the LO2A. If, however, the Cosmos Transaction is completed, many of these risks will be (i) primarily related to the likelihood of our ability to successfully enter into any LO2A Transaction and, if we do, the terms thereof, which will mostly affect the holders of CVRs, and (ii) immaterial to the operation of the post-closing combined company.

General Business Risks

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 or strategic activities, including from loans from Ridge Valley Corporation (“Ridge”) and Rimon Gold Assets Ltd. (“Rimon Gold”) and from third parties, private placements (of ordinary shares of Wize Israel and, following the 2017 Merger, our common stock) and, most recently, the Bonus Agreements and the pending PIPE Agreements. We have historically incurred net losses, including net losses of approximately $10.42 million and $3.45 million for the years ended December 31, 2020 and 2019, respectively. At December 31, 2020, we had an accumulated deficit of approximately $39.2 million. We do not know whether or when we will become profitable. To date, we have not commercialized any products or generated any material 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:

| ● | initiate and manage pre-clinical development and clinical trials for LO2A;

| ● | seek regulatory approvals for LO2A;

| ● | implement internal systems and infrastructures;

| ● | seek to license additional technologies to develop;

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| ● | pay royalties and other payments related to the LO2A License Agreement;

| ● | hire management and other personnel; and

| ● | move towards commercialization.

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 are exposed to fluctuations in the market value of our investments.

As of December 31, 2020, we owned 18,822,533 Bonus Shares, representing approximately 2% of the outstanding shares of Bonus. As of such date, the closing sale price of one Bonus Share was NIS 0.484 (equivalent to $0.151), totaling an amount of $2,833,000. Market values of these investments can be negatively affected by various factors, including business and financial results, of the issuers of such securities.

We adjust our marketable securities according to fair value based on Bonus Share market price. All gains and losses on marketable securities, realized and unrealized, are recognized as financial income (expense), which increases the volatility of our financial income (expense).

As a result of these factors, the value or liquidity of our cash equivalents, as well as our marketable securities could decline and result in a material impairment, which could materially adversely affect our financial condition and operating results.

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We may 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 December 31, 2020, we had cash and cash equivalents of approximately $0.2 million and marketable securities of approximately $2.8 million. We have expended and may 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:

| ● | any payments to be made to Resdevco under the LO2A License Agreement;

| ● | the failure to obtain regulatory approval or achieve commercial success of LO2A;

| ● | 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;

| ● | the costs, timing and outcome of regulatory review of LO2A that progress to clinical trials;

| ● | the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our issued patents and defending intellectual property-related claims;

| ● | the cost of commercialization activities if any LO2A is approved for sale for a particular indication, including marketing, sales and distribution costs;

| ● | the cost of manufacturing LO2A;

| ● | the timing, receipt and amount of sales of, or royalties on, our future products, if any;

| ● | the expenses needed to attract and retain skilled personnel;

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| ● | any product liability or other lawsuits related to our products;

| ● | the extent to which we acquire or invest in businesses, products or technologies and other strategic relationships; and

| ● | the costs of financing unanticipated working capital requirements and responding to competitive pressures.

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 December 31, 2020 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 December 31, 2020, 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, 2020 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:

| ● | the level of research and development investment required to develop LO2A;

| ● | the costs of obtaining or manufacturing LO2A for research and development and testing;

| ● | the results of preclinical and clinical testing, which can be unpredictable in drug development;

| ● | changes in drug development plans needed to address any difficulties that may arise in manufacturing, preclinical activities or clinical studies;

| ● | our ability and willingness to enter into new agreements with strategic partners and the terms of these agreements;

| ● | our success rate in preclinical and clinical efforts associated with milestones and royalties;

| ● | the costs of investigating patents that might block us from developing potential product candidates;

| ● | the costs of recruiting and retaining qualified personnel;

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| ● | the time and costs involved in obtaining regulatory approvals;

| ● | our revenues, if any;

| ● | the costs of filing, prosecuting, defending and enforcing patent claims and other intellectual property rights; and

| ● | our need or decision to acquire or license complementary technologies or new platform or product candidate targets.

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.

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, 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:

| ● | the timing of regulatory approvals in the countries, and for the uses, we seek;

| ● | the competitive environment;

| ● | the establishment and demonstration in the medical community of the safety and clinical efficacy of LO2A and its potential advantages over existing therapeutic products;

| ● | our ability to enter into strategic agreements with pharmaceutical and biotechnology companies with strong marketing and sales capabilities;

| ● | the adequacy and success of distribution, sales and marketing efforts; and

| ● | the pricing and reimbursement policies of government and third-party payors, such as insurance companies, health maintenance organizations and other plan administrators.

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.

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Our current pipeline is based on a single compound, LO2A. Failure to develop LO2A will have a material adverse effect on us.

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 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 (the “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.

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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:

| ● | unforeseen safety issues;

| ● | determination of dosing issues;

| ● | lack of effectiveness or efficacy during clinical trials;

| ● | failure of third party suppliers to perform final manufacturing steps for the drug substance;

| ● | slower than expected rates of patient recruitment and enrollment, especially during the COVID-19 pandemic;

| ● | lack of healthy volunteers and patients to conduct trials;

| ● | inability to monitor patients adequately during or after treatment;

| ● | 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;

| ● | inability or unwillingness of medical investigators and institutional review boards to follow our clinical trial protocols; and

| ● | lack of sufficient funding to finance the clinical trials.

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 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) 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.

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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 currently intend to either (i) explore strategic transactions with pharmaceutical companies or others that will monetize our rights in the LO2A licensed technology, or (ii) 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. 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:

| ● | developing drugs;

| ● | undertaking pre-clinical testing and human clinical trials;

| ● | obtaining FDA, addressing various regulatory matters and other regulatory approvals of drugs;

| ● | formulating and manufacturing drugs; and

| ● | launching, marketing and selling drugs.

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:

| ● | 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;

| ● | attract funding; and

| ● | attract and hire scientific talent and other qualified personnel.

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:

| ● | restrictions on the products, manufacturers or manufacturing process;

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| ● | warning letters;

| ● | civil or criminal penalties, fines and injunctions;

| ● | product seizures or detentions;

| ● | import or export bans or restrictions;

| ● | voluntary or mandatory product recalls and related publicity requirements;

| ● | suspension or withdrawal of regulatory approvals;

| ● | total or partial suspension of production; and

| ● | refusal to approve pending applications for marketing approval of new products or supplements to approved applications.

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.

The COVID-19 pandemic, or any other pandemic, epidemic or outbreak of an infectious disease, may materially and adversely affect our business and operations.

The outbreak of COVID-19 originated in Wuhan, China, in December 2019 and has since spread to multiple countries, including the United States, Israel and many European countries in which we operate. On March 11, 2020, the World Health Organization declared the outbreak a pandemic. While COVID-19 is still spreading and the final implications of the pandemic are difficult to estimate at this stage, it is clear that it has affected the lives of a large portion of the global population. At this time, the pandemic has caused states of emergency to be declared in various countries, travel restrictions imposed globally, quarantines established in certain jurisdictions and various institutions and companies being closed. We are actively monitoring the pandemic and we are taking any necessary measures to respond to the situation in cooperation with the various stakeholders.

Based on guidelines provided by the Israeli Government, employers (including us) are also required to prepare and increase as much as possible the capacity and arrangement for employees to work remotely. We have been deemed an essential business in Israel and our offices remain open during the pandemic, though some of our workforce works remotely. In addition, COVID-19 infection of our workforce could result in a temporary disruption in our business activities, including manufacturing, sales and other functions.

The COVID-19 pandemic is also affecting the United States, Israel and global economies and has affected, and may continue to affect, the conduct of our clinical trials and may in the future affect our operations and those of third parties on which we rely, including by causing disruptions in our raw material supply, though to date we have not experienced any such disruptions.

In addition, the COVID-19 pandemic may affect the operations of the FDA, and other health authorities, which could result in delays of reviews and approvals, including with respect to our existing clinical trials and may, directly or indirectly impact the pace of enrolment in our clinical trials as patients may avoid or may not be able to travel to healthcare facilities and physicians’ offices unless due to a health emergency and clinical trial staff can no longer get to the clinic. Additionally, such facilities and offices have been and may continue to be required to focus limited resources on non-clinical trial matters, including treatment of COVID-19 patients, thereby decreasing availability, in whole or in part, for clinical trial services.

To date, during certain periods of the COVID-19 pandemic, our stock price fluctuated significantly, and such fluctuation may continue to occur. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on our business, financing or clinical trial activities, or on healthcare systems or the global economy as a whole. However, these effects could have a material impact on our liquidity, capital resources, operations and business and those of the third parties on which we rely.

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.

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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 “Item 1. BUSINESS — LO2A License Agreement” above). 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, but such option was cancelled on March 30, 2017.

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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:

| ● | 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;

| ● | we may not obtain rights from Resdevco to any further patents or patent applications related to LO2A;

| ● | we or Resdevco may be subject to interference proceedings;

| ● | we or Resdevco may be subject to opposition proceedings in foreign countries;

| ● | any patent that is issued may not provide meaningful protection;

| ● | we or Resdevco may not be able to develop additional proprietary technologies that are patentable;

| ● | other companies may challenge patents licensed or issued to us or our customers;

| ● | other companies may independently develop similar or alternative technologies, or duplicate our technologies;

| ● | other companies may design around technologies we have licensed or developed; and

| ● | enforcement of patents is complex, uncertain and expensive.

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.

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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.

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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:

| ● | these agreements may be breached;

| ● | these agreements may not provide adequate remedies for the applicable type of breach;

| ● | our and Resdevco’s trade secrets or proprietary know-how will otherwise become known; or

| ● | our competitors will independently develop similar technology or proprietary information.

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:

| ● | 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;

| ● | 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;

| ● | Resdevco or any future strategic partners might not have been the first to file patent applications covering certain of our technology;

| ● | 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;

| ● | 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;

| ● | 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;

| ● | We may not develop additional proprietary technologies that are patentable; and

| ● | The patents of others may have an adverse effect on our business.

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.

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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.

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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 2017 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.

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, 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.

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The concentration of the capital stock ownership with our insiders will likely limit the ability of our stockholders to influence corporate matters.

As of March 1, 2021, our executive officers, directors, five percent or greater stockholders, and their respective affiliated entities in the aggregate beneficially own approximately 53.55% 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 “Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS” below.

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 2017 Merger, Wize Israel was traded on the 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 2017 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. In addition, as a smaller reporting company we are not subject to the auditor attestation requirements of Section 404 of such internal control.

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.

Anti-takeover provisions under our certificate of incorporation 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.

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 (the “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.

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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, 178 of which are issued and outstanding as of the date of this Annual Report. 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 holders of Common Stock 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.

During the first quarter of 2021, the market price of our common stock fluctuated from a high of $1.19 per share to a low of $0.23 per share, and our stock price continues to fluctuate. The market price of our common stock may continue to fluctuate significantly in response to numerous factors, some of which are beyond its control, such as:

| ● | announcements of technological innovations, new products or product enhancements by us or others;

| ● | 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;

| ● | public concern as to the safety of LO2A;

| ● | success of research and development projects;

| ● | success in clinical and preclinical studies;

| ● | developments concerning intellectual property rights or regulatory approvals;

| ● | variations in our and our competitors’ results of operations;

| ● | changes in earnings estimates or recommendations by securities analysts, if our Common Stock is covered by analysts;

| ● | changes in government regulations or patent decisions;

| ● | developments by our licensees;

| ● | developments in the biotechnology industry;

| ● | the results of product liability or intellectual property lawsuits;

| ● | future issuances of Common Stock or other securities;

| ● | the addition or departure of key personnel;

| ● | announcements by us or our competitors of acquisitions, investments or strategic alliances;

| ● | 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

| ● | the other factors described in the section entitled “RISK FACTORS” above and below.

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.

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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 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 U.S. 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 U.S. Dollar. These measures, however, may not adequately protect us from adverse effects.

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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.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

None.

ITEM 2. PROPERTIES.

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 $25,000. 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.

ITEM 3. LEGAL PROCEEDINGS.

In October 2018, the Israeli Securities Authority (“ISA”) commenced administrative enforcement proceedings against Wize Israel, the Company’s former Chairman and the Company’s Chief Financial Officer (who, at the relevant time, served as Wize Israel’s chief financial officer) in connection with certain public reports filed by Wize Israel with the ISA prior to the closing of the 2017 Merger. In August 2019, the ISA’s Administrative Enforcement Committee approved a settlement of the proceedings, whereby, (i) Wize Israel undertook to pay a civil penalty of NIS 200,000 (equivalent to approximately $57,000) to the ISA and (ii) the Company’s Chief Financial Officer undertook to pay a civil penalty of NIS 175,000 (equivalent to approximately $50,000) to the ISA and also agreed that, if he will violate, at any time until August 2020, certain provisions of Israeli securities laws relating to misleading public reports, he will be barred, for a nine-month period thereafter, from serving as an officer or director in certain entities supervised by the ISA, including companies that are publicly traded in Israel (but, for the sake of clarity, not companies traded in the U.S., such as the Company).

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.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Price for our Common Stock

Our Common Stock traded on the OTCQB under the symbol “WIZP”.

Holders

As of March 1, 2021, there were approximately 126 stockholders of record holding 23,905,209 shares of our Common Stock. This number does not include an indeterminate number of stockholders whose shares are held by brokers in street name.

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.

Unregistered Sales of Equity Securities and Use of Proceeds

Other than as set forth elsewhere in this Annual Report or as previously disclosed in our filings with the SEC, we did not sell any equity securities during the year ended December 31, 2020 in transactions that were not registered under the Securities Act. The issuance of such securities were made in transactions exempt from registration under Section 4(a)(2) of the Securities Act and/or Rule 506 and/or Regulation S promulgated thereunder.

ITEM 6. SELECTED FINANCIAL DATA.

As a “smaller reporting company” the information required by this item is not required to be provided.

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ITEM 7. 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, 2020 and December 31, 2019 and accompanying notes appearing elsewhere in this Annual Report. 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 Annual Report. 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 material revenues from operations since our inception and we do not currently expect to generate any significant revenues for the foreseeable future, primarily because LO2A is still in early clinical stage development in the markets and for the indications we are currently targeting (DES with CCH and/or Sjögren’s). Our operating expenses have decreased from $3,170,000 in the year ended December 31, 2019 to $2,442,000 in the year ended December 31, 2020. We may 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.

Results of Operations

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

|  | Year Ended December 31, |
|  | 2020 |  |  | 2019 |
Operating expenses: |  |  |  |  |  |
Research and development expenses |  | $ | (434,000 | ) |  | $ | (492,000 | )
General and administrative expenses |  |  | (2,008,000 | ) |  |  | (2,678,000 | )
Total operating costs |  |  | (2,442,000 | ) |  |  | (3,170,000 | )
Financial income (expense), net |  |  | (2,487,000 | ) |  |  | (280,000 | )
Net loss |  | $ | (4,929,000 | ) |  | $ | (3,450,000 | )

Revenues

We did not generate any revenues from operations during the years ended December 31, 2020 and 2019. 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 and OcuWize) 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 $434,000 for the year ended December 31, 2020, compared to $492,000 for the year ended December 31, 2019, a decrease of $58,000 or 11.8%. The decrease in research and development expenses is primarily related to conducting the Sjögren clinical trial in 2019, as compared to only conducting a partial trial in 2020. For more information with respect to our expenses in connection with entering into the LO2A License Agreement, please see Note 5 of the audited consolidated financial statements of Wize Israel appearing elsewhere in this Annual Report.

General and administrative expenses. General and administrative expenses were $2,008,000 for the year ended December 31, 2020, compared to $2,678,000 for the year ended December 31, 2019, a decrease of $670,000 or 25%. The decrease in general and administrative expenses during these periods is primarily related to decrease in share based payments of $442,000, a decrease in professional services of $436,000 and in overseas travel expenses of $103,000, which were partially offset by an increase in payroll and benefits of $364,000.

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Financial income (expense), Net. Financial expense, net was $2,487,000 for the year ended December 31, 2020 compared to financial expense, net of $280,000 for the year ended December 31, 2019, a change of $2,207,000 or 788.2%. The increase in financial expense, net during this period is primarily related to the increase in financial loss related to the Bonus Agreements of $3,642,000, and decrease in gain from amortization of premium related to convertible loans of $1,257,000, which were partially offset by an increase in gain from change in the fair value of marketable securities and sale of shares of $1,727,000 and decrease in loss from loss from extinguishment of convertible loans of $977,000 that occurred in 2019.

Net Loss. As a result of the foregoing, we incurred a net loss of $4,929,000 for the year ended December 31, 2020 compared to a net loss of $3,450,000 for the year ended December 31, 2019, an increase in the net loss of $1,479,000 or 42.9%.

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. In the past several years, we financed our operations primarily through equity and convertible debt financings in private placements, as described below.

Working Capital and Cash Flows

As of December 31, 2020 and December 31, 2019, we had $247,000 and $718,000 in cash and cash equivalents, respectively.

As of December 31, 2020, we had $265,000 in outstanding short term loans relating to the loan obtained by OcuWize from Bank Hapoalim. As of December 31, 2019, we had no outstanding loans.

As of December 31, 2020 and December 31, 2019, we had $1,317,000 and $506,000 of working capital, respectively. As of December 31, 2020, we had an accumulated deficit of $39,218,000. The increase in working capital was primarily due to an increase in marketable equity securities related to our acquisition of the Bonus Shares.

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, |
|  | 2020 |  |  | 2019 |
Net cash used in operating activities |  | $ | (1,519,000 | ) |  | $ | (2,064,000 | )
Net cash provided by investing activities |  | $ | 823,000 |  |  | $ | - |
Net cash provided by (used in) financing activities |  | $ | 197,000 |  |  | $ | (360,000 | )

Year Ended December 31, 2020 Compared to Year Ended December 31, 2019

For the years ended December 31, 2020 and 2019, net cash used in operating activities was $1,519,000 and $2,064,000, respectively. The decrease in net cash used in operating activities was mainly due to (A) (i) a decrease in amortization of premium related to convertible loans of $1,257,000,(ii) an increase in loss from recognition of mandatorily redeemable Series B Preferred Stock of $3,207,000, (iii) an increase in loss from revaluation of mandatorily redeemable Series B Preferred Stock $597,000, (iv) an increase in loss from revaluation of a contingent obligation with respect to future revenues of $435,000, (v) a decrease in other current assets of $251,000 and (vi) an increase in other accounts payable of $524,000, which were partially offset by (B) (i) an increase in net loss of $1,479,000, (ii) an increase in gain on marketable equity securities of $1,724,000,(iii) a decrease in stock based compensation of $572,000, (iv) a decrease in loss from extinguishment of convertible loans of $977,000, (v) recognition of a gain from completion of milestone closing of $847,000 and (vi) recognition of gain from settlement shares of $100,000 in 2020.

For the years ended December 31, 2020 and 2019, net cash provided by investing activities was $823,000 and none, respectively. The increase in net cash used in investing activities was mainly due to an increase in proceeds from the sale of Bonus Shares of $821,000 which did not occur in 2019.

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For the years ended December 31, 2020 and 2019, net cash provided by (used in) financing activities was $197,000 and $(360,000), respectively. The cash provided by financing activities in 2020 was due to a loan received from a bank on July 15, 2020 in an amount of $247,000 and the difference between the funds that were raised in the Series B Purchase Agreement (as defined below) in the amount of $7,500,000 and the funds that were invested in connection with the Bonus Agreements, which amounted to $7,400,000, which was partially offset by the payment of license fees to Resdevco for the 2020 fiscal year in an amount of $150,000. Cash provided in 2019 from proceeds of $550,000 from issuance of shares and warrants and cash used was from convertible loans repayment in an amount of $760,000.

Outlook

According to management estimates, liquidity resources as of December 31, 2020 may not be sufficient to maintain our planned level of operations for the next 12 months. However, for a long-term solution (for the sake of clarity, if the pending Cosmos Transaction is not consummated as planned), we will need to seek additional capital for the purpose of implementing our business strategy and managing our business and developing drug candidates. Conducting clinical trials and commercializing products is expensive and we will need to raise substantial additional funds to achieve our strategic objectives. We have not yet generated any material revenues from our current operations, and therefore we are dependent upon external sources for financing our operations. We will require significant additional financing in the near future. Additional financing may not be available on acceptable terms, if at all. Our future capital requirements as well as the ability to obtain financing will depend on many factors, including those listed under “RISK FACTORS – Risks Related to our Business” above. As of December 31, 2020, we had an accumulated deficit and a minimal amount of stockholders’ equity. In addition, during the years ended December 31, 2019 and 2020, 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 report of our independent registered public accounting firm on the audited financial statements as of and for the year ended December 31, 2020 contains an emphasis of matter paragraph regarding substantial doubt about our ability to continue as a going concern. Substantial doubt about our ability to continue as a going concern could materially limit our ability to raise additional funds through the issuance of new debt or equity securities or otherwise. Future reports on our financial statements may also include an emphasis of matter paragraph with respect to our ability to continue as a going concern.

We currently have no agreements, arrangements, or understandings with any person to obtain funds through bank loans, lines of credit, or any other sources, other than the PIPE Agreements in connection with the Bid Agreement. 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 Bonus Shares that we currently hold a result of the Bonus Agreements.

Notwithstanding the foregoing, if we consummate the Cosmos Transaction, including the Offer, as currently contemplated to occur on or about March 9, 2021, our business, including outlook, future plans and corporate structure, will be materially impacted. For example, due to the Cosmos Transaction and the contemplated distribution of CVRs, we expect that, following the Closing Date, we will focus on the development of Cosmos’ Bitcoin mining business and that, with respect to our initiatives for the LO2A, we will focus on achieving an LO2A Transaction as contemplated by the CVR Agreement.

Principal Financing Activities. The following is a summary of the equity and debt financings conducted by us in the past several years:

2019 Loan Amendment. On March 4, 2019, the Company and Wize Israel entered into an amendment (the “2019 Amendment”) to convertible loan agreements that were originally entered into in 2016 and 2017 (the “Loan Agreements”) with Rimon Gold, Ridge and Fisher (“Fisher”, and together with Rimon Gold and Ridge, the “2019 Lenders”). Pursuant to the 2019 Amendment, the maturity date under the Loan Agreements was extended to May 31, 2019. The parties also agreed that the 2019 Lenders’ remaining investment rights under one of the Loan Agreements to invest up to $512,800, in the aggregate, at $1.308 per share, and the Lender’s remaining investment rights under one of the other Loan Agreements to invest up to $663,400, in the aggregate, at $1.332 per share, be extended from June 30, 2019 to November 30, 2019.

April 2019 Purchase of Existing Convertible Loans by Chief Executive Officer. In April 2019 our Chief Executive Officer purchased directly from Ridge all of the outstanding convertible loans held by Ridge in the amount of approximately $279,000 for a total of 265,531 shares of common stock issuable upon conversion of the loans and accompanying investment rights to purchase an additional 94,382 shares of common stock at $1.332 per share.

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May 2019 Loan Amendment. On May 31, 2019, the Company and Wize Israel entered into an amendment to convertible loan agreements (the “May 2019 Amendment”) with Rimon Gold, Mobigo Inc., an entity owned by our Chief Executive Officer (“Mobigo”), and Fisher. Pursuant to the May 2019 Amendment, the maturity dates under the Loan Agreements were extended to November 30, 2019. The parties also agreed that the lenders’ investment rights under the Loan Agreements to invest up to $512,809, in the aggregate, at $1.308 per share, and invest up to $663,446, in the aggregate, at $1.332 per share, be extended to May 31, 2021. As consideration for extending the maturity date of the loans, the Company issued to the lenders two-year warrants to purchase an aggregate of 868,034 shares of common stock at an exercise price of $1.10 per share.

November 2019 Loan Amendment. On November 29, 2019, the Company and Wize Israel entered into an amendment to convertible loan agreements with Rimon Gold, Mobigo and Fisher (together, the “Lenders”). Pursuant to the Amendment, the Company repaid approximately $760,000 of the $1,520,000 outstanding under the loans on November 29, 2019 and the Lenders agreed to convert the remaining outstanding amounts of the loans at a later date. On December 13, 2019, the Company issued to the Lenders an aggregate of 2,816,196 shares of common stock upon conversion of the loans at a reduced conversion price of $0.27 per share and issued warrants to purchase an aggregate of 5,632,392 shares of common stock at an exercise price of $0.27. The warrants have a term of five years and will be exercisable five days following the public announcement of positive clinical data results for LO2A. In addition, the parties agreed that effective December 13, 2019, the exercise price or conversion price of all other convertible securities previously issued to the Lenders in connection with the loans (the “Existing Convertible Securities”) shall be adjusted to $0.27 per share and that the aggregate number of shares of common stock issuable upon exercise or conversion of a Lender’s Existing Convertible Securities shall be reduced in accordance with the percent of such Lender’s conversion of its outstanding loan. In addition, it was agreed that in any case when the exercise price of the October 2018 Warrants is reduced as a result of dilutive issuance to an exercise price lower than the exercise or conversion price of the Investment Rights granted under the Loan Agreements, than the exercise or conversion price of the Investment Rights shall be reduced to the new 2018 Warrants exercise price (“New Exercise Price”). As of December 31, 2019, the New Exercise Price of such Investment Rights was $0.16.

December 2019 Private Placement. On December 20, 2019 the, Company entered into a securities purchase agreement (the “December 2019 Purchase Agreement”) with an accredited investor. Pursuant to the December 2019 Purchase Agreement, the Company sold to the investor, in a private placement, an aggregate of 2,037,037 shares of common stock for a purchase price of $0.27 per share, for aggregate gross proceeds of $550,000. The Company also agreed to issue to the investor five-year warrants to purchase an aggregate of 4,074,047 shares of common stock. The warrants will have an exercise price of $0.27 per share and will be exercisable five days following the public announcement of positive clinical data results for LO2A. The warrants will be exercisable on a cashless basis in the event that, six months after issuance, there is not an effective registration statement for the resale of the shares underlying the warrants.

The Bonus/LO2A Transaction. On January 9, 2020, the Company entered into (i) an Exchange Agreement (the “Bonus Exchange Agreement”), with Bonus BioGroup Ltd. (“Bonus”), an Israeli company whose ordinary shares are traded on the Tel Aviv Stock Exchange (“TASE”), 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 L02A-based products (“LO2A Proceeds”) (if any), which, as more fully defined in the Bonus Exchange Agreement, include 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, as amended; 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.

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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 $7.4 million, which funds were deposited into an escrow account (the “Bonus Escrow Account”), of which (i) $500,000 was to be paid to Bonus as an advance promptly following execution of the Bonus Purchase Agreement, (ii) $3.2 million was to 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) $3.7 million was to be released to Bonus upon the Milestone Closing (as defined in the Bonus Purchase Agreement), in exchange for 50% of the PIPE Shares that were to be issued by Bonus and deposited into the escrow at the closing.

In June and July 2020, we entered into a letter agreement (and amendment thereto) with Bonus, whereby, among other things, we agreed with Bonus on the manner that a portion of the fees payable to the financial advisor in connection with the Bonus Agreements will be payable by Bonus.

Our obligation to consummate the Milestone Closing was 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”).

On November 29, 2020, we entered into an Addendum (the “Addendum”) with Bonus, whereby, among other things, Bonus agreed to issue to Wize ordinary shares of Bonus (the “Bonus Shares”), the total number of which consists of (i) the Milestone Settlement Shares, which, as defined in the Addendum, means Bonus Shares equal to the quotient obtained by dividing US$500,000 expressed in NIS (based on the exchange rate set in the Addendum) by NIS 0.50, and (ii) the HCW Settlement Shares (together with the Milestone Settlement Shares, the “Settlement Shares”), which, as defined in the Addendum, means Bonus Shares equal to the quotient obtained by dividing US$350,000 expressed in NIS (based on the exchange rate set in the Addendum) by NIS 0.50. In consideration for the Settlement Shares, Wize agreed to make certain amendments to the Bonus Agreements, including the following key modifications: (i) Wize will waive the requirement that Bonus will effect the Nasdaq Listing and, in relation thereto, conduct the Milestone Closing, which means that US$3.7 million were released from an existing escrow account to Bonus, whereas the 28,413,000 Bonus Shares held in such escrow (the “Nasdaq Milestone Shares”) were released to Wize and to its former holders of Series B Preferred Stock (the “Former Series B Holders”); (ii) Wize will waive approximately US$120,000 in liquidated damages that accrued as a result of the delay in effecting the Nasdaq Listing; and (iii) Bonus agreed to extend the period for Wize to create, and cause its Israeli subsidiaries to create, certain first priority liens in favor of Bonus to secure obligations under the Bonus Exchange Agreement, including certain related negative covenants. The closing occurred on December 29, 2020. It should be noted that, in accordance with the obligations of Wize to the Former Series B Holders (see below), Wize has transferred 80% of the Milestone Settlement Shares and 80% of the Nasdaq Milestone Shares to such investors.

As of March 1, 2021, we held 2,845,541 Bonus Shares, which based on the closing sale price of the Bonus Shares on the TASE as of such date, were worth NIS 3, 656,520 (equivalent to $1,114,793).

Series B Preferred Stock and Redemption. 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 sold to the investors, and the investors purchased 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 (the “Series B Preferred Stock”) for a purchase price of $1,000 per share, for aggregate gross proceeds under the Series B Purchase Agreement of $7.5 million, which funds were deposited into an escrow account, of which (i) $500,000 was paid to the Bonus Escrow Account and $100,000 was 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 $6.9 million were released to the Bonus Escrow Account upon the closing of the transactions contemplated by the Series B Purchase Agreement (of which, as described above, $3.7 million shall 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).

Pursuant to the Certificate of Designations of Series B Non-Voting Redeemable Preferred Stock (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 were not convertible into shares of common stock of the Company and had 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 entitled 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 was 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, and (ii) December 28, 2020, unless the Company elected to redeem the Series B Preferred Stock earlier.

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On February 19, 2020, the Company closed (i) the Series B Purchase Agreement and issued and sold 7,500 shares of Series B Preferred Stock for aggregate gross proceeds of $7.5 million and (ii) the Bonus Agreements, whereby the Company sold 37% of the LO2A Proceeds to Bonus as described above and invested $7.4 million in Bonus, of which $3.7 million were released to Bonus at closing in consideration for 85,239,000 Bonus Shares and $3.7 million were deposited into an escrow account, and in consideration for their release upon the Nasdaq Listing, an additional 28,413,000 Bonus Shares will be released to the Company (and, following the redemption described below, to the other former holders of Series B Preferred Stock). However, as of September 30, 2020 and as of the date hereof, Bonus has not satisfied the Nasdaq Listing condition and the Milestone Closing has not occurred. Accordingly, such amount is presented as restricted deposit (asset) in the balance sheet, as of September 30, 2020 and the same amount is reflected as part of the liability with respect to the Series B Preferred Stock.

On July 8, 2020, the Company elected to redeem all of the Series B Preferred Stock. As a result, the Company distributed 68,191,200 Bonus Shares to the holders of Series B Preferred Stock, representing 80% of the Bonus Shares then held by the Company.

Short Term Loan. On July 15, 2020, OcuWize entered into a loan agreement with Bank Hapoalim (the “Bank”), whereby the Bank extended a loan in the principal amount of NIS 850,000 (approximately $247,000) (the “2020 Loan”). The 2020 Loan bears interest at an annual rate of 5.45%, which will be paid in monthly payments. The 2020 Loan has a maturity date of January 15, 2020. In order to secure its obligations and performance pursuant to the 2020 Loan, OcuWize recorded a pledge in favor of the Bank and agreed that at any time, the value of all the assets in the bank account will not be less than NIS 1,700,000 (approximately $496,000). In order to satisfy this requirement, the Company loaned to OcuWize a portion of the Bonus Shares held by it. The 2020 Loan was fully repaid on January 14, 2021.

Warrant Exercises and Exchanges. On December 8, 2020, we entered into exchange agreements (the “Exchange Agreements”) with certain holders of common stock purchase warrants issued by the Company in October 2018 to purchase an aggregate of 3,000,000 shares of the Company’s common stock (the “2018 Warrants”). Pursuant to the terms of the Exchange Agreements, the holders of the 2018 Warrants surrendered their 2018 Warrants for cancellation and received, as consideration for such cancellation, an aggregate of 3,000,000 restricted shares of common stock.

On December 24, 2020, we entered into an agreement (the “2020 Agreement”) with certain holders representing a majority of the then outstanding 2018 Warrants. Pursuant to the terms of the 2020 Agreement, we agreed to voluntarily reduce the exercise price of the 2018 Warrants to $0.001 per share until January 7, 2021, after which such exercise price shall revert back to $0.16 per share. As a result of the adjustment to the exercise price of the 2018 Warrants, the exercise price of the warrants issued in November 2017 (the “2017 Warrants”), the placement agent warrants issued in October 2018 (the “2018 Placement Agent Warrants”), the warrants issued to certain lenders in May 2019 (the “May 2019 Warrants”), the warrants issued to certain lenders in November 2019 (the “November 2019 Warrants”), the warrants issued to certain purchasers from the private placement in December 2019 (the “December 2019 Warrants”) and certain investment rights issued in January 2017 (the “Investment Rights”) were also adjusted to reflect a reduced exercise price of $0.001 per share (collectively, the “Warrant Adjustments”). As a result of the Warrant Adjustments, on December 29, 2020 an aggregate of 13,332,657 were issued as a result of the exercise of such warrants, each on a cashless basis. Such warrant exercises also included warrants beneficially owned by our Chief Executive Officer, Noam Dannenberg.

In light of the foregoing, as of March 1, 2021, we no longer have any warrants or investment rights outstanding except 26,287 warrants.

Off-Balance Sheet Arrangements

As of December 31, 2020 and December 31, 2019, we did not have any off-balance sheet arrangements, as such term is defined under Item 303 of Regulation S-K, that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Recently Issued Accounting Pronouncements

For information with respect to recent accounting pronouncements, see Note 2u to our audited consolidated financial statements for the year ended December 31, 2020.

Critical Accounting Policies

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.

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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. As of December 31, 2020, the Company revalued the liability to its fair value with the assistance of an external valuation specialist, pursuant to the Company’s estimations and assumptions.

The Company has determined that the inputs used in measuring the fair value of the contingent payment obligation fall within Level 3 in the fair value hierarchy which involves significant estimations and assumptions regarding any projected future proceeds from the LO2A, including, among others, the dry eye US market size in 2025 (USD 2.9 Billion), the maximum penetration rate of the product into the U.S. market - 12%, the patent expiration date (2038), the operational profit estimated rate - 26%, the probabilities for FDA phases approvals, and the risk-adjusted rate for discounting future cash flows - 20.3%.

The Company has determined that the inputs used in measuring the fair value of the contingent payment obligation fall 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, see Note 10. Actual results could differ from the estimates made. Changes in fair value (including the component related to imputed interest), would be included in the consolidated statements of comprehensive loss as part of financial income (loss) under the heading “Changes in fair value of contingent payment obligation with respect to future revenues.”

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

As a smaller reporting company, we have elected not to provide the disclosure required by this item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

All information required by this item is included in Item 15 of Part IV of this Annual Report and is incorporated into this item by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a- 15(e) and 15d- 15(e) under the Exchange Act), as of the end of the period covered by this Annual Report. Based on such evaluation, our Acting Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2020, our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

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Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed our internal control over financial reporting as of December 31, 2020, the end of our fiscal year. Management based its assessment on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Management’s assessment included evaluation of such elements as the design and operating effectiveness of key financial reporting controls, process documentation, accounting policies, and our overall control environment.

Based on our assessment, management has concluded that our internal control over financial reporting was effective, as of the end of the fiscal year, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external reporting purposes in accordance with generally accepted accounting principles.

Report of Independent Registered Public Accounting Firm

This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the rules of the SEC, applicable to smaller reporting companies that permit the Company to provide only management’s report in this Annual Report.

Changes in Internal Control

There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the fourth quarter of 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

ITEM 9B. OTHER INFORMATION.

The Bid Agreement contains an obligation that Wize will establish an incentive compensation program with respect to 40,000,000 shares of our common stock, to be granted promptly following the Closing Date, in the form of performance-based RSUs, performance rights or indeterminate rights based on the performance milestone criteria and allocation set in the Bid Agreement (the “Post-Closing Incentive Plan”), 20 million of which are to be granted to personnel specified by Wize prior to the Closing Date and the remainder to be granted to personnel of Cosmos. In this respect, it should be noted that our Board of Directors determined to specify to Cosmos that each of Mr. Danenberg and Mr. Eisenberg would receive, once such Post-Closing Incentive Plan is established, 8,960,000 and 7,240,000 performance-based RSUs (or other rights) pursuant to the Post-Closing Incentive Plan, respectively, and that Mr. Danenberg will have discretion to direct Cosmos to whom to award the balance. Under the Bid Agreement, such grants will be made promptly, and in any event, within 90 days, following the Closing Date.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

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
Mark Sieczkarek |  | 65 |  | Chairman of the Board
Michael Belkin |  | 78 |  | Director
Yossi Keret |  | 54 |  | Director
Joseph Zarzewsky |  | 59 |  | Director
Noam Danenberg |  | 49 |  | Chief Executive Officer
Or Eisenberg |  | 38 |  | 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.

Mark Sieczkarek has served as our Chairman since April 23, 2019. Mr. Sieczkarek has served as Chief Executive Officer of Fe3 Medical Inc., now Bria Medical, since 2015 and as a director of Orange Twist LLC since 2018.

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From 2015 through 2018, Mr. Sieczkarek served as Chairman and Chief Executive Officer of NovaBay Pharmaceuticals, Inc. He has served as Chief Executive Officer and Chairman of Solta Medical, Inc. from 2006 until its acquisition by Valeant Pharmaceuticals International, Inc. in 2014. From 2003 to 2011, Mr. Sieczkarek served as Chief Executive Officer of Conceptus, Inc. prior to its acquisition by Bayer Pharmaceuticals. From 1995 to 2003, Mr. Sieczkarek held multiple roles of increasing commercial responsibility at Bausch & Lomb, including President of Europe and the Americas. He has also held senior executive level positions with KOS Pharmaceuticals, various subsidiaries of Bristol Myers-Squibb, and Sanofi Diagnostics Pasteur. Mr. Sieczkarek earned an MBA in Finance from Canisius College in Buffalo, New York and a BS in Accounting from the State University of New York at Buffalo.

Michael Belkin, M.A., M.D. Michael Belkin has served on our board since July 1, 2013. Dr. Belkin is, and has been since 1981, 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 also established and was 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 more than 35 patents. He is an internationally recognized eye researcher and has received various research awards. He is an entrepreneur and advisor of several ophthalmic companies in the fields of lasers, optics, ophthalmic devices, pharmaceutics and biotechnology. One of hisinventions, the ExPRESS miniature glaucoma shunt, is currently used worldwide. He established a few more startups based on his inventions such as Belkin laser, NovaSight and SpringVision. 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 2017 Merger. Mr. Keret is serving as Chief Executive Officer, and Director of Nanorobotics LTD as of March 2019. 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 (“EY”). 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.

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Joseph Zarzewsky. Joseph Zarzewsky has served on our board since the closing of the 2017 Merger. 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. Mr. Zarzewsky also serves as a member of the board of directors of Brimag Digital Age Ltd. (TASE: BRMG) and CollPlant Biotechnologies Ltd. (NASDAQ: CLGN).

Noam Danenberg. Noam Danenberg has served as our Chief Executive Officer since April 23, 2019. He served as our Chairman and director since November 7, 2018 until April 23, 2019. He served as our Chief Operating Officer from the closing of the 2017 Merger until November 7, 2018. Mr. Danenberg has served as a strategic advisor of Wize Israel since April 2015. Mr. Danenberg co-founded Panmed Inc. 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. from the European University in Antwerp, Belgium and an M.B.A. from the Boston University Brussels Graduate Center.

Or Eisenberg. Or Eisenberg has served as our Chief Financial Officer, Treasurer and Secretary since the closing of the 2017 Merger. He served as our Acting Chief Executive officer since November 15, 2017 until April 23, 2019. 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 EY. Mr. Eisenberg holds a B.A. from Haifa University in Economics and Accounting and is a Certified Public Accountant in Israel.

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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 DES. 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. In June 2018, Dr. Asbell was named to her current position as the Barrett G. Haik Endowed Chair for Ophthalmology in the College of Medicine and Director of the Hamilton Eye Institute at the University of Tennessee Health Science Center (“UTHSC”). Dr. Asbell joined UTHSC from the Icahn School of Medicine at Mount Sinai (“ISMMS”) in New York, where she is a professor of Ophthalmology and director of the Cornea Service and of the Cornea Clinical and Research Fellowships, which she initiated. She is the vice chair of the ISMMS Appointment and Promotion Committee, medical director of the Faculty Practice for Ophthalmology, and system vice chair for Academic Affairs for the Department of Ophthalmology. 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.

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Family Relationships

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 appointed by our Board or elected by our shareholders 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 the Board of Directors, 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.

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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 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 Mark Sieczkarek, Dr. Michael Belkin, Yossi Keret and Joseph Zarzewsky are independent as defined under the rules promulgated by the Nasdaq. Other than Mr. Zarzewsky, none of the independent directors has any relationship with us besides serving on our Board.

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 “Item 1. BUSINESS — Marketing, Sales and Distribution” above. Our Board considered these relationships and determined that they would not interfere with 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.

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, 2020, our Board held 7 meetings.

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Committees

Audit Committee and Audit Committee Financial Expert

The members of our Audit Committee are Yossi Keret and Joseph Zarzewsky. 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 rules and regulations.

Compensation Committee

The members of our Compensation Committee are Yossi Keret, Dr. Michael Belkin and Joseph Zarzewsky. The Board of Directors has determined that all of the members of the Compensation Committee are “independent” as defined by the rules of the SEC and the Nasdaq rules and regulations.

Other Committees

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. Mark Sieczkarek currently serves as our Chairman of the Board, Mr. Noam Danenberg currently serves as our Chief Executive Officer and Mr. Or Eisenberg currently serves as our 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.

Director Attendance at Annual Meetings

We will make every effort to schedule our annual meeting of stockholders at a time and date to accommodate attendance by directors taking into account the directors’ schedules. While all directors are encouraged to attend our annual meeting of stockholders, there is no formal policy as to their attendance at annual meetings of stockholders.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our directors, executive officers and persons who own more than 10% of our Common Stock to file with the SEC reports of ownership and changes in ownership of our Common Stock. Our directors, executive officers and greater than 10% beneficial owners of our Common Stock are required by SEC regulation to furnish us with copies of all Section 16(a) reports they file. Based solely upon information furnished to us and contained in reports filed with the SEC, we believe that all Section 16(a) reports of our directors, executive officers and greater than 10% beneficial owners were filed timely for the fiscal year ended December 31, 2020 except that Rimon Gold filed one late Form 4.

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ITEM 11. EXECUTIVE COMPENSATION.

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, 2020 and 2019. 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, |  | 2020 |  |  | 228,000 |  |  |  | 199,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 427,000 |
Chief Financial Officer and former Acting Chief Executive Officer (4) |  | 2019 |  |  | 188,000 |  |  |  | - |  |  |  | - |  |  |  | 100,000 |  |  |  | 7,000 | (3) |  |  | 295,000 |
Noam Danenberg, Chief Executive Officer, former Chairman, Chief Operating Officer and Strategic Advisor (5) |  | 2020 |  |  | 223,000 |  |  |  | 199,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 422,000 |
|  | 2019 |  |  | 197,000 |  |  |  | - |  |  |  | - |  |  |  | 100,000 |  |  |  | 7,000 | (3) |  |  | 304,000 |

(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 Financial Accounting Standards Board (“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 2017 Merger. He served as the Acting Chief Executive Officer and Chief Financial Officer of Wize Israel since 2015. Mr. Eisenberg resigned from his position as the Acting Chief Executive Officer in April 2019.

(5) | Mr. Danenberg was appointed as our Chief Executive Officer in April 2019. He served as our Chairman and director since November 7, 2018 until April 23, 2019. Mr. Danenberg resigned from his position as our Chief Operating Officer, Chairman and Strategic Advisor in November 2018. The services of Mr. Danenberg were 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.

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.

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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 since the 2017 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 ($147,014), 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. Mr. Eisenberg’s salary was so increased following consummation of the Company’s October 2018 private placement and the Series B Purchase Agreement. 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 Chief Executive Officer. 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. The consulting fees were so increased following consummation of the Company’s October 2018 private placement and the Series B Purchase Agreement.

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.

Chairman Agreement with Mark Sieczkarek

In connection with Mr. Sieczkarek’s appointment, the Company and Mr. Sieczkarek entered into a Chairman Agreement (the “Chairman Agreement”) whereby Mr. Sieczkarek shall receive 202,399 restricted stock units and options to purchase 102,222 shares of the Company’s common stock at an exercise price of $2.00 per share (the “Chairman Awards”). The Chairman Awards shall vest as follows: one-eight (1/8) on the effective date of the Chairman Agreement and subsequently in seven equal quarterly installments commencing July 1, 2019. The Chairman Agreement has an initial term of two years and provides that in the event of a change of control (as defined in the Chairman Agreement) the Chairman Awards shall automatically vest in full as of that date. The Chairman Agreement also contains standard representations and warranties regarding confidential information, non-competition and non-solicitation.

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Outstanding Equity Awards at Fiscal Year-End

The following tables provides information regarding all outstanding equity awards for our named executive officers as of December 31, 2020:

Name |  | Exercisable |  |  | Unexercisable |  |  | Option Exercise price ($) |  |  | Expiration Date
Or Eisenberg (1) |  |  | 30,000 |  |  |  | 6,000 |  |  |  | 3.59 |  |  | 4/4/2025
Noam Danenberg (2) |  |  | 30,000 |  |  |  | 6,000 |  |  |  | 3.59 |  |  | 4/4/2025
Mark Sieczkarek (3) |  |  | 89,445 |  |  |  | 12,777 |  |  |  | 2 |  |  | 14/5/2026

(1) | These options were granted on April 1, 2018 and vested as follows: the options vests in twelve (12) consecutive equal installments over a three year period commencing the April 1, 2019.
(2) | These options were granted on April 1, 2018 and vested as follows: the options vests in twelve (12) consecutive equal installments over a three year period commencing the April 1, 2019.

(3) | These options were granted on May 15, 2019 and vested as follows: eight (8) installments commencing May 15, 2019 and subsequently in seven equal quarterly installments commencing May 15, 2019.

Compensation of Directors

The following table provides information regarding the total compensation that we paid or awarded to our directors during the year ended December 31, 2020. Mr. Danenberg’s compensation is described under “Executive Compensation” above.

Name |  | Fees Earned or Paid in Cash |  |  | Stock Awards |  |  | Option Awards |  |  | Nonqualified Deferred Compensation Earnings |  |  | All Other Compensation |  |  | Total |
|  | ($) |  |  | ($) |  |  | ($)(1) |  |  | ($) |  |  | ($) |  |  | ($) |
Mark Sieczkarek (2) |  |  | - |  |  |  | 52,730 |  |  |  | 7,170 |  |  |  | - |  |  |  | - |  |  |  | 59,900 |
Dr. Michael Belkin (3) |  |  | 20,400 |  |  |  | 26,860 |  |  |  | 7,570 |  |  |  | - |  |  |  | - |  |  |  | 54,830 |
Yossi Keret |  |  | 23,100 |  |  |  | 26,860 |  |  |  | 7,570 |  |  |  | - |  |  |  | - |  |  |  | 57,530 |
Dr. Franck Amouyal (4) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Joseph Zarzewsky |  |  | 23,100 |  |  |  | 26,860 |  |  |  | 7,570 |  |  |  | - |  |  |  | - |  |  |  | 57,530 |

(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) | On April 23, 2019, we granted to Mark Sieczkarek 202,399 restricted stock units vesting quarterly over a period of 1.5 years.
| On May 15, 2019, we granted to Mark Sieczkarek options to purchase 102,222 shares of our Common Stock at $2 per share. The options vested as follows: eight (8) installments commencing May 15, 2019
| On August 11, 2020, we granted to Mark Sieczkarek 150,000 restricted stock units vesting quarterly over a period of 2 years.
(3) | 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.

(4) | Dr. Amouyal resigned from the Board on March 8, 2020.

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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, and it was terminated on February 25, 2021. Mr. Zarzewsky introduced us to the Chinese Distributor. See “Item 1. BUSINESS — Marketing and Sales” above.

Consulting Agreement with Michael Belkin.

On March 31, 2019, we entered into a consulting agreement with Michael Belkin, pursuant to which we agreed to pay him a monthly retainer of NIS 5,000 (approximately $1,450) and options exercisable into 5,000 shares of common stock per month. The agreement expired on September 30, 2019.

Compensation of Directors

In March 2019, our board approved annual cash fees of $15,000 in addition to $1,400 per in person meeting, $500 per signed unanimous consent and $700 per telephonic meeting, with respect to meetings and/or signed resolutions, as applicable, of the Board of Directors or a committee of the Board of Directors.

Our board also approved the following equity grants in the past two years:

| ● | In March 2019, our Board approved the following equity grants (i) 100,000 restricted stock units vesting quarterly over a period of two years to each director, (ii) 140,000 restricted stock units vesting quarterly over a period of two years to Mr. Danenberg as compensation for his services as the then Chairman, and (iii) 140,000 restricted stock units vesting quarterly over a period of two years to our Chief Financial Officer; and
| ● | In August 2020, our Board approved the following equity grants: (i) 150,000 restricted stock units vesting quarterly over a period of two years to the Chairman of the Board of Directors and (ii) 100,000 restricted stock units vesting quarterly over a period of two years to each of the other three non-executive directors.

We have also purchased Directors and Officers insurance to cover the potential liability of our directors and executive officers.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The following table sets forth information as of March 1, 2021 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 March 1, 2021, there were 33,052,951 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. Unless otherwise indicated in the footnotes to this table, we believe that each of the stockholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned.

Beneficial Owner |  | Amount and Nature of Beneficial Ownership |  |  | Percent of Class |
5% and Greater Shareholders |  |  |  |  |  |  |  |
Rimon Gold Assets Ltd. (1) |  |  | 6,927,866 |  |  |  | 20.96 | %
Ridge Valley Corporation (2) |  |  | 1,040,760 |  |  |  | 3.15 | %
Jonathan Rubini (3) |  |  | 7,100,048 |  |  |  | 21.48 | %
Named Executive Officers and Directors |  |  |  |  |  |  |  |
Mark Sieczkarek (4) |  |  | 360,871 |  |  |  | 1.09 | %
Dr. Michael Belkin (5) |  |  | 194,676 |  |  |  | * |
Yossi Keret (6) |  |  | 162,500 |  |  |  | * |
Joseph Zarzewsky (7) |  |  | 162,500 |  |  |  | * |
Or Eisenberg (8) |  |  | 216,100 |  |  |  | * |
Noam Danenberg (9) |  |  | 2,945,208 |  |  |  | 8.9 | %
Executive Officers and Directors as a Group (7 Persons) (11) |  |  | 3,879,354 |  |  |  | 11.6 | %

* | Represents ownership of less than 1%

(1) | 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) | 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.

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(3) | Excludes 178,000 shares of Common Stock issuable upon conversion of Series A Preferred Stock within 61 days following provision of notice to the Company. The address for Mr. Rubini is 2655 Marston Drive, Anchorage, Alaska 99517.

(4) | Represents (i) 215,499 shares of Common Stock, (ii) 44,050 shares of Common Stock issuable upon the vesting of RSUs within 60 days of March 1, 2021, (iii) 102,222 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days of March 1, 2021.
(5) | Represents (i) 112,500 shares of Common Stock, (ii) 44,050 shares of Common Stock issuable upon the vesting of RSUs within 60 days of March 1, 2021, (iii) 57,176 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days of March 1, 2021.
(6) | Represents (i) 112,500 shares of Common Stock, (ii) 25,000 shares of Common Stock issuable upon the vesting of RSUs within 60 days of March 1, 2021, (iii) 25,000 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days of March 1, 2021.
(7) | Represents (i) 112,500 shares of Common Stock, (ii) 25,000 shares of Common Stock issuable upon the vesting of RSUs within 60 days of March 1, 2021, (iii) 25,000 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days of March 1, 2021.
(8) | Represents (i) 162,600 shares of Common Stock, (ii) 17,500 shares of Common Stock issuable upon the vesting of RSUs within 60 days of March 1, 2021, (iii) 36,000 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days of March 1, 2021.
(9) | Represents (i) 162,600 shares of Common Stock which were issued to N. Danenberg Holdings, a services company wholly owned by Mr. Danenberg (“NDH”), (ii) 2,480,069 shares of Common Stock which were issued to Mobigo Inc, a services company wholly owned by Mr. Danenberg, (iii) 17,500 shares of Common Stock issuable upon the vesting of RSUs which were issued to NDH, and (iv) 36,000 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days of March 1, 2021 which were issued to NDH. Excludes the shares beneficially owned by Ridge (see footnote 2).
(10) | Represents (i) 3,493,906 shares of Common Stock, (ii) 129,050 shares of Common Stock issuable upon the vesting of RSUs within 60 days of March 1, 2021, and (iii) 256,398 shares of Common Stock issuable upon the exercise of stock options currently exercisable or exercisable within 60 days of March 1, 2021.

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Equity Compensation Plan Information

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 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, 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, 2020, we had 40,474 shares of Common Stock available for future grant under the 2012 Plan. During the years ended December 31, 2020 and 2019, we did not grant any new stock options under the 2012 Plan.

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.

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 of Directors, 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.

75

The following table summarizes information as of the close of business on December 31, 2020 concerning the 2012 Plan and other options outstanding.

Plan category |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |  |  | Weighted-average exercise price of outstanding options, warrants and rights (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 |  |  | 4,352 |  |  |  | 81.81 |  |  |  | 40,474 |
Equity compensation plans not approved by security holders |  |  | - |  |  |  | - |  |  |  | - |
Total |  |  | 4,352 |  |  |  | 81.81 |  |  |  | 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 435,053 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 lesser of (i) 1,000,000 shares or (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year.

The following table summarizes information as of the close of business on December 31, 2020 concerning the 2018 Plan and other options outstanding.

Plan category |  | Number of securities to be issued upon exercise of outstanding options, warrants and rights (a) |  |  | Weighted-average exercise price of outstanding options, warrants and rights (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 |  |  | 290,222 |  |  |  | 2.64 |  |  |  | 2,184,813 |
Equity compensation plans not approved by security holders |  |  | - |  |  |  | - |  |  |  | - |
Total |  |  | 290,222 |  |  |  | 2.64 |  |  |  | 2,184,813 |

76

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE.

Described below are the transactions and series of similar transactions since January 1, 2020 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.

For more information, please see “Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS” above.

Agreements with Executive Officers and Directors

Mr. Noam Danenberg, our chief executive officer is also the husband of Tali Harpaz, who owns 49% of Ridge.

Pursuant to the Series B Purchase Agreement, Mr. Danenberg, through Mobigo, has purchased 300 shares of Series B Preferred Stock in the aggregate amount of $300,000, and Mr. Sieczkarek has purchased 50 shares of Series B Preferred Stock in the aggregate amount of $50,000.

As a result of the Warrant Adjustments, on December 29, 2020 an aggregate of 13,332,657 were issued as a result of the exercise of such warrants, each on a cashless basis. Such warrant exercises also included warrants beneficially owned by our Chief Executive Officer, Noam Dannenberg.

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 “Item 11. EXECUTIVE COMPENSATION — Executive Compensation – Executive Employment Agreements” and “Item 11. EXECUTIVE COMPENSATION — Compensation of Directors” above.

See also the PIPE Agreement entered into by Mr. Danenberg. For more information regarding this agreement, please see “Item 1. BUSINESS – Overview – The Cosmos Transaction.”

Director Independence

See Item 10 – “DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE –Director Independence” above.

Procedures for Approval of Related Party Transactions

Our Board is charged with reviewing and approving all potential related party transactions. All such related party transactions must then be reported under applicable SEC rules. We have not adopted other procedures for review, or standards for approval, of such transactions, but instead review them on a case-by-case basis.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

On February 15, 2018, the Company dismissed Kost Forer Gabbay & Kasierer, a member of EY as the Company’s independent registered public accounting firm and engaged Fahn Kanne & Co. Grant Thornton Israel (“Grant Thornton”) as its new independent registered public accounting firm.

77

During the two most recent fiscal years and the interim periods preceding the engagement of Grant Thornton, neither the Company nor anyone on its behalf had previously consulted with Grant Thornton regarding either (a) the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s financial statements, and neither a written report was provided nor oral advice was provided to the Company that concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or (b) any matter that was either the subject of a disagreement (as defined in paragraph 304(a)(1)(iv) of Regulation S-K and the related instructions thereto) or a reportable event (as described in paragraph 304(a)(1)(v)) of Regulation S-K).

Audit Fee

The following table shows the fees paid or accrued by us for the audit and other services provided by Grant Thornton for 2020 and 2019:

|  | 2019 |  |  | 2020 |
Audit Fees (1) |  | $ | 75,000 |  |  | $ | 75,000 |
Audit Related Fees |  |  | - |  |  |  | - |
Tax Fees (2) |  |  | - |  |  | $ | 5,000 |
All other Fees (3) |  |  | - |  |  |  | - |
Total Fees |  | $ | 75,000 |  |  | $ | 80,000 |

(1) | Consists of fees billed for the audit of our annual financial statements and the review of financial statements included in our 10-Q, 8-K reports and services normally provided by the accountant in connection with statutory and regulatory filings or engagements.

(2) | The aggregate fees billed in each of the last two fiscal years for professional services rendered by the named accountant for tax compliance, tax advice, and tax planning.

(3) | The aggregate fees billed in each of the last two fiscal years for products and services provided by the named accountant, other than the services reported above.

Audit Committee Pre-approval Policies and Procedures

Until February 22, 2018, we did not have an audit committee and as a result our Board performed the duties of an audit committee. Our audit committee evaluates and approves in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services. We do not rely on pre-approval policies and procedures.

78

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

(a) Index to Financial Statements

The following consolidated financial statements are filed as part of this Annual Report:

79

WIZE PHARMA, INC. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

AS OF DECEMBER 31, 2020

U.S. DOLLARS IN THOUSANDS

INDEX

|  | Page
Report of Independent Registered Public Accounting Firm |  | F-2
Consolidated Balance Sheets |  | F-4
Consolidated Statements of Comprehensive Loss |  | F-5
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) |  | F-6
Consolidated Statements of Cash Flows |  | F-8
Notes to Consolidated Financial Statements |  | F-9

F-1

| 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.

Opinion on the financial statements

We have audited the accompanying consolidated balance sheets of Wize Pharma, Inc. (a Delaware corporation) and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of comprehensive loss, changes in stockholders’ equity (deficit), and cash flows for each of the two years in the period ended December 31, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.

Going concern

The accompanying 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 and negative cash flows from operations since its inception, and has not yet generated any material revenues. As of December 31, 2020, there is an accumulated deficit of $39,218 thousand and a stockholders’ deficit of $4,148 thousand. 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 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 regarding 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.

F-2

Critical audit matter

critical audit matter communicated below is a matter arising from the current period audit of the Financial Statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the Financial Statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of this critical audit matter does not alter in any way our opinion on the Financial Statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates

As described further in Note 1a, Note 2v and in Note 10a to the Financial Statements, the Company granted to a third party the right to receive a percentage of the Company’s future proceeds, as defined, from specified products, in exchange for the issuance to the Company of a fixed number of the third party’s shares. The Company has elected to measure the contingent obligation with respect to future revenues at fair value on a recurring basis, with changes in fair value recognized in earnings. The determination of the fair value of the contingent obligation requires management to make significant estimates and assumptions related to the forecast of future revenues, estimated maximum penetration rate into the U.S market, estimated operational profit rate, probability of regulatory approvals, and risk-adjusted rate for estimating future cash flows. These assumptions could have a significant impact on the determination of the fair value of the contingent obligation with respect to future revenues. We identified the remeasurement of the fair value of this contingent obligation as of December 31, 2020 as a critical audit matter principal consideration for our determination that the remeasurement of the fair value of the contingent obligation with respect to future revenues as of December 31, 2020 is a critical audit matter is the high degree of management subjective judgement necessary in determining the inputs and assumptions utilized in the analysis. The assumptions included the forecast of future revenues, estimated maximum penetration into the U.S. market, estimated operational profit rate, probability of regulatory approvals, and risk-adjusted rate for estimating future cash flows, which contribute significantly to the fair value of this contingent obligation as of December 31, 2020. Given the subjective nature and judgement applied by management, including management-employed specialists, auditing these estimates required a high degree of auditor judgement and an increased extent of effort including the use of auditor-employed specialists.

Our audit procedures related to the remeasurement of the contingent obligation with respect to future revenues as of December 31, 2020, included the following, among others.

| ● | We evaluated the qualifications of the management-employed specialists, and obtained the reports prepared by the specialists.

| ● | We evaluated the reasonableness of management’s assumptions related to the forecast of future revenues, estimated maximum penetration into the U.S. market, estimated operational profit rate, probability of regulatory approvals, and risk-adjusted rate for estimating future cash flows by comparing these estimates to historical operating results, third-party industry and other data related to the regulatory environment and the market for the specified products, and discussions with management, along with sensitivity analyses around the estimates.

| ● | We utilized an auditor-employed valuation specialist to assess the appropriateness of the valuation methodology used and to assist us with testing key inputs and assumptions in the valuation model.

/s/ FAHN KANNE & CO. GRANT THORNTON ISRAEL

We have served as the Company’s auditor since 2018.

Tel-Aviv, Israel

March 1, 2021

F-3

WIZE PHARMA INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

U.S. dollars in thousands (except share data)

|  | As of December 31, |
|  | 2020 |  |  | 2019 |
ASSETS |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |  |  |
Cash and cash equivalents |  | $ | 247 |  |  | $ | 718 |
Restricted cash deposit |  |  | 13 |  |  |  | 41 |
Marketable equity securities (Notes 3,10) |  |  | 2,834 |  |  |  | 10 |
Other current assets (Note 4) |  |  | 66 |  |  |  | 378 |
Total current assets |  |  | 3,160 |  |  |  | 1,147 |
NON-CURRENT ASSETS: |  |  |  |  |  |  |  |
Operating lease right of use assets |  |  | 22 |  |  |  | 22 |
Property and equipment, net |  |  | 7 |  |  |  | 7 |
Total non-current assets |  |  | 29 |  |  |  | 29 |
TOTAL ASSETS |  | $ | 3,189 |  |  | $ | 1,176 |
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |
Accounts payable (Note 7) |  | $ | 1,306 |  |  | $ | 369 |
Operating lease obligation - current |  |  | 22 |  |  |  | 22 |
Current portion of license purchase obligation (Note 6) |  |  | 250 |  |  |  | 250 |
Short term loan payable (Note 9) |  |  | 265 |  |  |  | - |
Total current liabilities |  |  | 1,843 |  |  |  | 641 |
NON-CURRENT LIABILITIES: |  |  |  |  |  |  |  |
Contingent obligation with respect to future revenues (Note 10) |  |  | 5,494 |  |  |  | - |
Total non-current liabilities |  |  | 5,494 |  |  |  | - |
COMMITMENTS AND CONTINGENCIES (Note 12) |  |  |  |  |  |  |  |
STOCKHOLDERS’ EQUITY (DEFICIT) (Note 13): |  |  |  |  |  |  |  |
Preferred stock A, with $0.001 par value per share (“Series A Preferred Stock”) |  |  |  |  |  |  |  |
Authorized: 1,000,000 shares at December 31, 2020 and 2019; Issued and outstanding: 178 shares at December 31, 2020 and 2019. |  |  | * |  |  |  | * |
Common stock, with $0.001 par value per share (“Common Stock”) |  |  |  |  |  |  |  |
500,000,000 shares authorized at December 31, 2020 and 2019; 32,783,495 and 15,873,128 shares issued and outstanding at December 31, 2020 and 2019, respectively |  |  | 33 |  |  |  | 16 |
Additional paid-in capital |  |  | 35,110 |  |  |  | 34,491 |
Accumulated other comprehensive loss |  |  | (73 | ) |  |  | (73 | )
Accumulated deficit |  |  | (39,218 | ) |  |  | (33,899 | )
Total stockholders’ equity (deficit) |  |  | (4,148 | ) |  |  | 535 |
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |  | $ | 3,189 |  |  | $ | 1,176 |

| * | Less than 1 thousand.

The accompanying notes are an integral part of the consolidated Financial Statements.

F-4

WIZE PHARMA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

U.S. dollars in thousands (except share and per share data)

|  | For the Year Ended December 31, |
|  | 2020 |  |  | 2019 |
Operating expenses: |  |  |  |  |  |
Research and development expenses |  | $ | 434 |  |  | $ | 492 |
General and administrative expenses (Note 14a) |  |  | 2,008 |  |  |  | 2,678 |
Operating loss |  |  | (2,442 | ) |  |  | (3,170 | )
Financial expense, net (Note 14b) |  |  | (2,487 | ) |  |  | (280 | )
Net loss |  | $ | (4,929 | ) |  | $ | (3,450 | )
Addition to net loss (for EPS purpose) |  |  |  |  |  |  |  |
Deemed dividend with respect to the repurchase of right for future investment |  |  | - |  |  |  | (185 | )
Deemed dividend due to exercise price adjustment of warrants as a result of certain down-round anti-dilution protection or price protection features included in the warrants |  |  | - |  |  |  | (267 | )
Deemed dividend due to exercise price adjustment of warrants |  |  | (390 | ) |  |  | - |
Net loss applicable to stockholders of Common Stock |  | $ | (5,319 | ) |  | $ | (3,902 | )
Comprehensive loss |  | $ | (4,929 | ) |  | $ | (3,450 | )
Basic and diluted net loss per share |  | $ | (0.32 | ) |  | $ | (0.36 | )
Weighted average number of shares of Common Stock used in computing basic and diluted net loss per share |  |  | 16,669,628 |  |  |  | 10,519,682 |

The accompanying notes are an integral part of the consolidated Financial Statements.

F-5

WIZE PHARMA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

U.S. dollars in thousands (except share data)

|  | Series A Preferred Stock |  |  | Common Stock |  |  | Additional paid-in |  |  | Accumulated other comprehensive income |  |  | Accumulated |  |  | Total stockholders’ equity |
|  | Number |  |  | Amount |  |  | Number |  |  | Amount |  |  | capital |  |  | (loss) |  |  | deficit |  |  | (deficit) |
Balance as of December 31, 2018 |  | 910 |  |  | $ | 1 |  |  | 8,957,550 |  |  | 9 |  |  | $ | 30,272 |  |  | $ | (73 | ) |  | $ | (29,997 | ) |  | $ | 212 |
Amounts allocated to repurchase of existing right for future investment related to the 2016 Loan and the 2017 Loan (See Note 8) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (633 | ) |  |  | - |  |  |  | - |  |  |  | (633 | )
Amounts that were allocated to recognition of the right for future investment and warrants – 2016 Loan (See Note 8) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 637 |  |  |  | - |  |  |  | - |  |  |  | 637 |
Amounts that were allocated to recognition of the right for future investment and warrants – 2017 Loan (See Note 8) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 962 |  |  |  | - |  |  |  | - |  |  |  | 962 |
Deemed dividends with respect to the repurchase of right for future investment (See Note 8) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (185 | ) |  |  | (185 | )
Issuance of Common Stock and warrants for cash (Note 13n) |  |  | - |  |  |  | - |  |  |  | 2,037,037 |  |  |  | 2 |  |  |  | 548 |  |  |  | - |  |  |  | - |  |  |  | 550 |
Issuance of Common Stock and warrants due to 2016 Loan and 2017 Loan repayment (Note 13e) |  |  | - |  |  |  | - |  |  |  | 2,816,196 |  |  |  | 3 |  |  |  | 991 |  |  |  | - |  |  |  | - |  |  |  | 994 |
Terms modification and cancellation of existing financial instruments due to 2016 and 2017 loan repayment (Note 8e) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (135 | ) |  |  | - |  |  |  | - |  |  |  | (135 | )
Issuance of Common Stock (Note 13b) |  |  | - |  |  |  | - |  |  |  | 900,000 |  |  |  | 1 |  |  |  | 764 |  |  |  | - |  |  |  | - |  |  |  | 765 |
Conversion of Preferred stock into Common Stock (Note 13c) |  |  | (732 | ) |  |  | (1 | ) |  |  | 732,000 |  |  |  | 1 |  |  |  |  |  |  |  | - |  |  |  | - |  |  |  | - |
Deemed dividend due to exercise price adjustment of warrants as a result of certain down-round anti-dilution protection or price protection features included in the warrants (Note 13) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 267 |  |  |  | - |  |  |  | (267 | ) |  |  | - |
Stock-based compensation |  |  | - |  |  |  | - |  |  |  | 430,345 |  |  |  | - |  |  |  | 818 |  |  |  | - |  |  |  | - |  |  |  | 818 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (3,450 | ) |  |  | (3,450 | )
Balance as of December 31, 2019 |  |  | 178 |  |  | $ | * |  |  |  | 15,873,128 |  |  |  | 16 |  |  | $ | 34,491 |  |  | $ | (73 | ) |  | $ | (33,899 | ) |  | $ | 535 |

| *) | Representing amount less than $1

The accompanying notes are an integral part of the consolidated Financial Statements.

F-6

WIZE PHARMA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

U.S. dollars in thousands (except share data)

(Continued)

|  | Series A Preferred Stock |  |  | Common Stock |  |  | Additional paid-in |  |  | Accumulated other comprehensive |  |  | Accumulated |  |  | Total stockholder’s equity |
|  | Number |  |  | Amount |  |  | Number |  |  | Amount |  |  | capital |  |  | loss |  |  | deficit |  |  | (deficit) |
Balance as of December 31, 2019 |  |  | 178 |  |  | $ | * |  |  |  | 15,873,128 |  |  |  | 16 |  |  | $ | 34,491 |  |  | $ | (73 | ) |  | $ | (33,899 | ) |  | $ | 535 |
Deemed dividend due to exercise price adjustment of warrants (Notes 13p, 13q) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 390 |  |  |  | - |  |  |  | (390 | ) |  |  | - |
Issuance of shares with respect to exercise of warrants (Notes 13p, 13q) |  |  | - |  |  |  | - |  |  |  | 16,332,654 |  |  |  | 17 |  |  |  | (17 | ) |  |  | - |  |  |  | - |  |  |  | - |
Stock-based compensation |  |  | - |  |  |  | - |  |  |  | 577,713 |  |  |  | - |  |  |  | 246 |  |  |  | - |  |  |  | - |  |  |  | 246 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (4,929 | ) |  |  | (4,929 | )
Balance as of December 31, 2020 |  |  | 178 |  |  | $ | * |  |  |  | 32,783,495 |  |  |  | 33 |  |  | $ | 35,110 |  |  | $ | (73 | ) |  | $ | (39,218 | ) |  | $ | (4,148 | )

*) | Representing amount less than $1

The accompanying notes are an integral part of the consolidated Financial Statements.

F-7

WIZE PHARMA INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

U.S. dollars in thousands

|  | For the Year Ended December 31, |
|  | 2020 |  |  | 2019 |
Cash flows from operating activities |  |  |  |  |  |
Net loss |  | $ | (4,929 | ) |  | $ | (3,450 | )
Adjustments to reconcile net loss to net cash used in operating activities: |  |  |  |  |  |  |  |
Depreciation |  |  | 2 |  |  |  | 1 |
Stock-based compensation |  |  | 246 |  |  |  | 818 |
Income (loss) from marketable equity securities sale and revaluation |  |  | (1,197 | ) |  |  | 527 |
Amortization of premium related to convertible loans (Notes 8 and 13) |  |  | - |  |  |  | (1,257 | )
Accrued interest on convertible loans (Notes 8 and 13b) |  |  | - |  |  |  | 45 |
Loss from extinguishment of convertible loans (Notes 8 and 13b) |  |  | - |  |  |  | 977 |
Gain from completion of milestone closing (Note 10) |  |  | (847 | ) |  |  | - |
Gain from settlement shares |  |  | (100 | ) |  |  | - |
Loss from recognition of mandatorily redeemable Series B Preferred Stock (Note 10) |  |  | 3,207 |  |  |  | - |
Change from revaluation of mandatorily redeemable Series B Preferred Stock (Note 10) |  |  | 597 |  |  |  | - |
Change from revaluation of contingent obligation with respect to future revenues (Note 10) |  |  | 435 |  |  |  | - |
Increase in license purchase obligation (Note 6) |  |  | 150 |  |  |  | 150 |
Financial expenses |  |  | 17 |  |  |  | - |
Change in: |  |  |  |  |  |  |  |
Other current assets |  |  | 313 |  |  |  | 62 |
Accounts payable |  |  | 587 |  |  |  | 63 |
Net cash used in operating activities |  |  | (1,519 | ) |  |  | (2,064 | )
Cash flows from investing activities |  |  |  |  |  |  |  |
Purchase of property and equipment |  |  | (1 | ) |  |  | * |
Proceeds from sale of marketable equity securities |  |  | 824 |  |  |  | - |
Net cash provided by investing activities |  |  | 823 |  |  |  | * |
Cash flows from financing activities |  |  |  |  |  |  |  |
Proceeds from issuance of shares and warrants (Note 13n) |  |  | - |  |  |  | 550 |
Net proceeds from issuance of mandatorily redeemable Series B Preferred Stock |  |  | 100 |  |  |  | - |
Loan received |  |  | 247 |  |  |  | - |
Convertible loan repayment |  |  | - |  |  |  | (760 | )
Repayment of license purchase obligation |  |  | (150 | ) |  |  | (150 | )
Net cash provided by (used in) financing activities |  |  | 197 |  |  |  | (360 | )
Effect of exchange rate change on cash, cash equivalents and restricted cash |  |  | - |  |  |  | - |
Change in cash, cash equivalents and restricted cash |  |  | (499 | ) |  |  | (2,424 | )
Cash, cash equivalents and restricted cash at the beginning of the year |  |  | 759 |  |  |  | 3,183 |
Cash, cash equivalents and restricted cash at the end of the year |  | $ | 260 |  |  | $ | 759 |
Supplemental disclosure of non-cash investing and financing activities: |  |  |  |  |  |  |  |
Ordinary shares issued through receipt of marketable securities (Note 13b) |  | $ | - |  |  | $ | 765 |
Amount allocated to the repurchase right for existing right for future investment related to the 2016 Loan and the 2017 Loan – March 2019 Loan Amendment |  | $ | - |  |  | $ | (481 | )
Amounts that were allocated to the recognition of right for future investment - 2016 Loan – March 2019 Loan Amendment |  | $ | - |  |  | $ | 256 |
Amounts that were allocated to the recognition of right for future investment - 2017 Loan – March 2019 Loan Amendment |  | $ | - |  |  | $ | 386 |
Deemed dividends with respect to the repurchase of right for future investment – March 2019 Loan Amendment |  | $ | - |  |  | $ | 104 |
Amount allocated to the repurchase right for existing right to future investment related to the 2016 Loan and the 2017 Loan – May 2019 Amendment |  | $ | - |  |  | $ | (152 | )
Amounts that were allocated to the right for future investment and warrants - 2016 Loan – May 2019 Amendment |  | $ | - |  |  | $ | 381 |
Amounts that were allocated to the right for future investment and warrants - 2017 Loan – May 2019 Amendment |  | $ | - |  |  | $ | 576 |
Deemed dividends with respect to the repurchase of right for future investment – May 2019 Amendment |  | $ | - |  |  | $ | 81 |
Amount allocated to the 2016 Loan - March 2019 Loan Amendment |  | $ | - |  |  | $ | 729 |
Amount allocated to the 2017 Loan - March 2019 Loan Amendment |  | $ | - |  |  | $ | 1,037 |
Amount allocated to the 2016 Loan - May 2019 Amendment |  | $ | - |  |  | $ | 634 |
Amount allocated to the 2017 Loan - May 2019 Amendment |  | $ | - |  |  | $ | 922 |
Repayment of convertible loans through Common Stock |  | $ | - |  |  | $ | 760 |
Deemed dividend due to exercise price adjustment of warrants as a result of certain down-round anti-dilution protection or price protection features included in the warrants |  | $ | - |  |  | $ | 267 |
Sell of Cannabics’s shares through a broker |  | $ | - |  |  | $ | 260 |
Amounts transferred from Series B Preferred Stock proceeds to restricted deposit held in escrow |  | $ | 3,700 |  |  |  | - |
Investment in marketable securities - Bonus Shares |  | $ | 13,851 |  |  |  | - |
Recognition of contingent obligation with respect to future revenues |  | $ | 5,059 |  |  |  | - |
Issuance of mandatorily redeemable Series B Preferred Stock |  | $ | 7,400 |  |  |  | - |
Settlement of mandatorily redeemable series B Preferred Stock through distribution of Bonus Shares |  | $ | 7,604 |  |  |  | - |
Deemed dividend due to exercise price adjustment of warrants |  | $ | 390 |  |  | $ | - |
Issuance of shares with respect to exercise of warrants |  | $ | 17 |  |  | $ | - |
Transaction costs liability, see note 10 |  | $ | 350 |  |  | $ | - |
Release of escrow account – Bonus Shares |  | $ | 3,700 |  |  | $ | - |

*) | Representing amount less than $1

The accompanying notes are an integral part of the consolidated Financial Statements.

F-8

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 1:- | GENERAL

| a. | Wize Pharma, Inc. (the “Company” or “Wize”) was incorporated in the State of Delaware.

Wize, through its wholly-owned Delaware subsidiary, Wize NC Inc. (“Wize NC”), and the wholly-owned subsidiary of Wize NC, OcuWize Ltd. (“OcuWize”), is a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including dry eye syndrome (“DES”).

Commencing August 30, 2016, Wize Pharma Ltd., a wholly owned subsidiary of the Company (“Wize Israel”) manages most of its activity through OcuWize Ltd. (“OcuWize”), a wholly owned Israeli subsidiary of Wize Israel, 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, see also note 5.

For discussion regarding the issuance of the Series B Preferred Stock (as described in Note 10 below) as a partial financing, concurrently with the recognition of an obligation with respect to 37% of future revenues of LO2A-based products (“LO2A Proceeds”) (if any) and the purchase of shares of Bonus BioGroup Ltd. (“Bonus”), classified as marketable equity securities that was completed in February 2020, see also Note 10.

On December 30, 2020, the Company entered into a Bid Implementation Agreement (as amended, the “Bid Agreement”) with Cosmos Capital Limited, a digital infrastructure provider based in Sydney, Australia (“Cosmos”). Pursuant to the Bid Agreement, the Company commenced an off-market takeover offer under applicable Australian laws (the “Offer”), whereby it offers 61.11 shares of common stock in exchange for each one outstanding share of Cosmos. Immediately following the Closing Date, and assuming all of the holders of Cosmos Shares accept the Offer, Cosmos shareholders are expected to own approximately 87.65% of the outstanding common stock of Wize, while Wize existing stockholders are expected to remain the owners of approximately 10.75% of the outstanding common stock of Wize, each on a fully diluted basis and including warrants to be issued to Wize’s financial advisor to the transaction.

Pursuant to the Bid Agreement, prior to the Closing Date, Wize will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with certain of Wize’s subsidiaries (the “Wize Subsidiaries”), a person designated by Wize prior to the Closing Date as the Holders’ Representative (as defined herein), and the Rights Agent (as defined therein). Pursuant to the CVR Agreement, at the Closing Date, each Wize pre-Closing securityholder will receive one non-transferable CVR for each outstanding share of common stock of Wize and for each share of common stock of Wize underlying other convertible securities and warrants, held as of 4:01 p.m. Eastern Time on the day immediately before the Effective Time (as defined in the CVR Agreement). See also note 10c.

| 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 December 31, 2020, the Company has an accumulated deficit of $39,218 and a total stockholders’ deficit of $4,148.

In addition, in each of the years ended December 31, 2020 and 2019, 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.

F-9

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 1:- | GENERAL (Cont.)

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 through the sale of Bonus Shares (as hereinafter defined), and, to the extent available, short-term and long-term loans as well as equity financings. 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, and subsequent redemption, of the Series B Preferred Stock concurrently with the transaction with Bonus in February 2020, see also Note 10.

Regarding the transaction with Cosmos on December 30, 2020, see note 10.

| c. | Risk factors:

As of December 31, 2020, the Company had an accumulated deficit of $39,218 and a total stockholders’ deficit of $4,148. 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 (other than financing related income and expenses) 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 further 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;

| ● | moves towards commercialization; and

| ● | Risks related to the effects of global outbreaks of pandemics or contagious diseases or fear of such outbreaks, such as the recent coronavirus (COVID-19) pandemic, including on our clinical trials, the demand for our products, our ability to operate and on overall economic conditions.

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. In addition, while the Company explores license and other strategic transactions in an attempt to monetize the LO2A, there is no assurance that the Company will be successful in doing so and, even if is able to do so, what the timing or terms thereof may be of such licenses or strategic transactions.

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 a highly regulated and competitive market, such as the biopharmaceutical market, where regulatory approval and market acceptance of its products are uncertain, and the other risks set forth in the Company’s filings with the U.S. Securities and Exchange Commission (“SEC”), including risks and uncertainties relating to the outbreak of the COVID-19 pandemic. There can be no assurance that the Company’s efforts will ultimately be successful or result in revenues or profits.

In light of the pending transaction with Bonus (see note 10), there are also risks relating to, among other things, the timing and anticipated completion of such transaction and whether the expected benefits of and potential value created by the transaction will materialize.

F-10

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

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 estimates in preparation of 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 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 as part of modification or the settlement of the convertible loans determining the fair value of the contingent obligation with respect to future revenues and whether modification of terms of financial instruments is considered substantial.

| 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.

| c. | Functional currency:

The Company aims to direct its main operations in the United States market. In addition, the convertible loans were denominated in U.S. dollars. 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 and during January 2020 the Company completed the issuance of 7,500 Series B Non-Voting Redeemable Preferred Stock for a purchase price of $1 per share for total gross proceeds of $7,500. 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, the functional currency of the Company is the U.S. dollar. The Company maintains its books and records in local currency, which is NIS.

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 |
|  | 2020 |  |  | 2019 |  |  | 2020 |  |  | 2019 |
USD 1 = NIS |  |  | 3.215 |  |  |  | 3.456 |  |  |  | (6.9 | ) |  |  | (7.8 | )

| d. | 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.

F-11

WIZE PHARMA 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.)

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 |  |  | December 31 |
|  | 2020 |  |  | 2019 |
Cash and cash equivalents |  | $ | 247 |  |  | $ | 718 |
Restricted cash deposit |  |  | 13 |  |  |  | 41 |
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows |  | $ | 260 |  |  | $ | 759 |

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

| f. | Marketable equity securities:

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 earnings.

| 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 Accounting Standards Codification (“ASC”) 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, 2020 and 2019, 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, 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”.

F-12

WIZE PHARMA 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.)

| j. | Severance pay:

Wize Israel has two employee as of December 31, 2020 and 2019. Wize Israel’s liability for severance pay is subject to Section 14 of Israel’s 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, 2020 and 2019.

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, 2020 and 2019 amounted to $16 and $17, respectively.

| k. | 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, 2020 and 2019, no liability for unrecognized tax positions has been recognized.

| l. | Concentrations of credit risk:

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash, cash equivalents, marketable securities and restricted bank deposits. Cash and cash equivalents and restricted bank deposits are invested in banks in Israel and the U.S.

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.

F-13

WIZE PHARMA 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.)

| m. | Convertible loans:

Allocation of proceeds:

The proceeds received upon the original issuance of the 2016 Loan (as defined below) 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.

The 2017 Loan (as defined below) was not issued with any detachable instruments.

Beneficial Conversion Features (“BCFs”):

| a. | Upon initial recognition, the Company has considered the provisions of ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity” (“ASC 815-40”), 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” (“ASC 470-20) which clarifies the accounting for instruments with BCFs or contingently adjustable conversion ratios, and has applied the BCFs guidance to determine whether the conversion feature is beneficial to the investor.

The BCFs 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) 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.

F-14

WIZE PHARMA 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.)

| b. | Upon initial recognition, the Company has considered the provisions of ASC 815-15, “Derivatives and Hedging - Embedded Derivatives”, 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, “Derivatives and Hedging” since its terms did 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 BCFs or contingently adjustable conversion ratios.

Pursuant to ASC 470-20-30, the amount of the BCFs 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 future Investment Rights) into which the 2017 Loan was 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 BCFs was limited to the amount of the entire proceeds.

| c. | Following modifications or exchanges of convertible loans that were accounted for as an extinguishment (see below), upon each additional 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 each of the extinguishments 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.

| d. | 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” (“ASC 470-50”). Such an assessment done by management either qualitatively or quantitatively based on the facts and circumstances of each transaction.

F-15

WIZE PHARMA 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.)

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.

F-16

WIZE PHARMA 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.)

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:

| 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) were presented as a direct deduction from the amount of the 2016 Loan and in subsequent periods such costs (together with the discount created by BCFs 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.

| b. | Upon initial recognition, costs incurred in respect of obtaining financing through issuance of the 2017 Loan (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.

Extinguishment of convertible loans:

Upon the final extinguishment of the convertible loans upon their maturity, the difference between the reacquisition price which consist of the cash paid, the fair value of instruments issued (shares and warrants) and the modification of loans and cancellation of existing financial instruments) and the carrying amounts of the convertible loans being extinguished was recognized as a gain or loss in the period of extinguishment.

| 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.

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.

F-17

WIZE PHARMA 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.)

| 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, 2020, 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.

| p. | Leases:

Effective January 1, 2019, the Company accounts for its leases under ASC 842, “Leases”. Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the consolidated balance sheet as both a right of use asset and a lease liability, calculated by discounting fixed lease payments over the lease term at the rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right of use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right of use asset results in straight-line rent expense over the lease term. Variable lease expenses are recorded when incurred.

In calculating the right of use asset and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election, and recognizes rent expense on a straight-line basis over the lease term.

The Company recognized $42 of operating lease right of use assets and operating lease liabilities at January 1, 2019. As of December 31, 2020 and 2019, total of right-of-use assets related to the Company’s operating leases and operating lease liabilities was $22.

The Company recorded an amortization of $20 in right of use assets and operating lease liabilities for the year ended December 31, 2020.

F-18

WIZE PHARMA 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.)

| q. | Series A Warrants and December 2019 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), the Company disregards 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 the Series A Warrants and warrants that were issued in October 2018 (the “October 2018 Warrants”) and in December 2019 (the “December 2019 Warrants”), as part of a private placement, as described in Note 13n, respectively, which include a down-round protection that would adjust the exercise price of the Series A 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 Series A 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 Series A 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 (increase of loss applicable) to common shareholders for purposes of basic earnings per share (EPS) calculation.

Regarding a triggering event that required down-round adjustment of the exercise price of the warrants during 2020 and 2019, see Note 13p and 13q, respectively.

Modifications to the terms of warrants that are classified as equity and remains to be classified in equity after the modification, are accounted for in a similar manner to share-based compensation guidance with respect to modifications. Accordingly, the incremental fair value from the modification (the change in the fair value of the warrant before and after the modification) is recognized in retained earnings as a deemed dividend (e.g., dividends to a particular class of equity holders).

| r. | 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 year ended December 31, 2020 and 2019, all outstanding warrants, 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.

F-19

WIZE PHARMA 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 loss and the weighted average number of shares used in computing basic and diluted net loss per share for the years ended December 31, 2020 and 2019, is as follows:

|  | Year ended December 31, |
|  | 2020 |  |  | 2019 |
Numerator: |  |  |  |  |  |
Net loss |  | $ | (4,929 | ) |  | $ | (3,450 | )
Add: Loss attributed to preferred stock (*) |  | $ | 53 |  |  | $ | 136 |
Less: Deemed dividend with respect to exercise price adjustment of warrants (Note 13r) |  | $ | (390 | ) |  | $ | - |
Less: Deemed dividend with respect to right for future investment |  | $ | - |  |  | $ | (185 | )
Less: Deemed dividend due to down round adjustment |  | $ | - |  |  | $ | (267 | )
Net loss applicable to stockholders of Common Stock |  | $ | (5,266 | ) |  | $ | (3,766 | )
Denominator: |  |  |  |  |  |  |  |
Shares of Common Stock used in computing basic and diluted net loss per share |  |  | 16,669,628 |  |  |  | 10,519,682 |
Net loss per share of Common Stock, basic and diluted |  | $ | (0.32 | ) |  | $ | (0.36 | )

| (*) | During the year ended December 31, 2018 the Company issued preferred A stock pursuant to the Purchase Agreement (as defined below). These shares of preferred stock are participating securities. During the years ended December 31, 2020 and 2019 there were no other potentially dilutive instruments.

|  | Year ended December 31, |
|  | 2020 |  |  | 2019 |
Number of shares: |  |  |  |  |  |
Common shares used in computing basic and diluted loss per share |  |  | 16,669,628 |  |  |  | 10,519,682 |
Preferred Stock and options excluded from the calculations of diluted loss per share |  |  | 614,763 |  |  |  | 16,931,097 |

| s. | Other comprehensive loss

The components of accumulated other comprehensive loss which resulted from foreign currency translation adjustment as of December 31, 2020 and 2019 were as follows:

|  | Total accumulated other comprehensive income (loss) |
Balance at December 31, 2020 |  | $ | (73 | )
Balance at December 31, 2019 |  | $ | (73 | )

| t. | 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. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

F-20

WIZE PHARMA 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 of stock options granted to Wize Israel employees was estimated using the Black- Scholes option pricing 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 the Company 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.

Following the adoption of ASU 2018-07 in January 2018, all equity-classified nonemployee share-based payment are accounted for in accordance with the provisions of ASC 718 and accordingly, awards granted during 2019 and 2020 were measured at grant-date fair value of the equity instruments that the Company is obligated to issue.

| u. | Recent Accounting Pronouncements not adopted yet

| 1. | ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”)

On June 2016, the FASB issued ASU Update 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”) ASU Update 2016-13 revised the criteria for the measurement, recognition, and reporting of credit losses on financial instruments to be recognized when expected.

On November 2019, the FASB issued ASU 2019-10, “Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) – Effective Dates,” which, among other provisions, the effective date of ASU 2016-13 was amended as follows

1. Public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies (SRCs) as defined by the SEC, for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years.

2. All other entities for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years.

As the Company is eligible to be considered as smaller reporting company, ASU 2016-13 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted.

The Company is in the process of evaluating the effect that ASU 2016-13 will have on the results of operations and financial statements, if any.

F-21

WIZE PHARMA 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. | ASU 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity

In August 2020, the FASB issued ASU 2020-06—Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (ASU 2020-06), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. Among other changes, ASU 2020-06 removes from GAAP the liability and equity separation model for convertible instruments with a cash conversion feature and beneficial conversion feature, and as a result, after adoption, entities will no longer separately present in equity an embedded conversion feature for such debt. Similarly, the embedded conversion feature will no longer be amortized into income as interest expense over the life of the instrument. Instead, entities will account for a convertible debt instrument wholly as debt unless (1) a convertible instrument contains features that require bifurcation as a derivative under ASC Topic 815, Derivatives and Hedging, or (2) a convertible debt instrument was issued at a substantial premium. Additionally, ASU 2020-06 requires the application of the if-converted method to calculate the impact of convertible instruments on diluted earnings per share (EPS).

The amendments in ASU 2020-06 are effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

ASU 2020-06 can be adopted on either a fully retrospective or modified retrospective basis. The adoption of this standard is not expected to result in a material impact to the Company’s financial statements.

| v. | 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. As of December 31, 2020, the Company revalued the liability to its fair value with the assistance of an external valuation specialist, pursuant to the Company’s estimations and assumptions.

F-22

WIZE PHARMA 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 has determined that the inputs used in measuring the fair value of the contingent payment obligation fall within Level 3 in the fair value hierarchy which involves significant estimations and assumptions regarding any projected future proceeds from the LO2A, including, among others, the dry eye US market size in 2025 (USD 2.9 Billion), the maximum penetration rate of the product into the U.S. market - 12%, the patent expiration date (2038), the operational profit estimated rate - 26%, the probabilities for FDA phases approvals, and the risk-adjusted rate for discounting future cash flows - 20.3%.

The Company has determined that the inputs used in measuring the fair value of the contingent payment obligation fall 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, see Note 10. Actual results could differ from the estimates made. Changes in fair value (including the component related to imputed interest), would be included in the consolidated statements of comprehensive loss as part of financial income (loss) under the heading “Changes in fair value of contingent payment obligation with respect to future revenues.”

| w. | Mandatorily Redeemable Series B Preferred Stock

The Company classified its formerly outstanding Series B 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 that equal (i) 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.

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 Preferred Stock based on the value of the Bonus Shares and the cash amount that the Company was required to transfer to the Series B investors upon the redemption of the Series B Preferred Stock. The difference between the amount received by the Company upon the issuance of the Series B Preferred Stock and their fair value as of that date was carried immediately to the consolidated statements of comprehensive loss as part of financial income (loss).

The issuance costs of the Series B Preferred Stock were recognized immediately as an expense during the three months ended March 31, 2020.

On July 8, 2020, the Company elected to redeem all of the Series B Preferred Stock. As a result, the Company distributed 68,191,200 Bonus Shares to the (now former) holders of Series B Preferred Stock.

On November 29, 2020, Wize entered into an Addendum (the “Addendum”) with Bonus, whereby, among other things, Bonus agreed to issue to the Company additional ordinary shares of Bonus (the “Bonus Shares”, the total number of which consists of (i) the Milestone Settlement Shares, which, as defined in the Addendum, means Bonus Shares equal to the quotient obtained by dividing US$500 expressed in NIS (based on the exchange rate set in the Addendum) by NIS 0.50, and (ii) the HCW Settlement Shares, as defined in note 10a (together with the Milestone Settlement Shares, the “Settlement Shares”), which, as defined in the Addendum, means Bonus Shares equal to the quotient obtained by dividing US$350 expressed in NIS (based on the exchange rate set in the Addendum) by NIS 0.50. In consideration for the Settlement Shares, the Company agreed to make certain amendments to the Bonus Agreements, including the following key modifications: (i) the Company will waive the requirement that Bonus will affect the Nasdaq Listing and, in relation thereto, conduct the Milestone Closing, which means that US$3.7 million were released from an existing escrow account to Bonus, whereas the 28,413,000 Bonus Shares held in such escrow (the “Nasdaq Milestone Shares”) were released to the Company and to its former holders of Series B Preferred Stock (the “Former Series B Holders”); (ii) the Company will waive approximately US$120 in liquidated damages that accrued as a result of the delay in effecting the Nasdaq Listing; and (iii) Bonus agreed to extend the period for the Company to create, and cause its Israeli subsidiaries to create, certain first priority liens in favor of Bonus to secure obligations under the Bonus Exchange Agreement, including certain related negative covenants. The closing occurred on December 29, 2020. It should be noted that, in accordance with the obligations of the Company to the Former Series B Holders (see below), the Company has transferred 80% of the Milestone Settlement Shares and 80% of the Nasdaq Milestone Shares to such investors.

As of December 31, 2020, the entire balance of the Series B preferred stock was extinguished.

F-23

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 3:- | MARKETABLE EQUITY SECURITIES

| a. | The Company owned 52,249 ordinary shares of Can-Fite representing approximately 0.04% of Can-Fite’s issued and outstanding share capital as of December 31, 2019. As of December 31, 2019, the investment amounted to $6. During the year ended December 31, 2019 the Company recorded a loss of $26. During 2020 the Company sold all of its Can-Fite ordinary shares for net proceeds of approximately $3.

| b. | As of December 31, 2019 the Company held 25,000 ordinary shares of Cannabics Pharmaceuticals, Inc. (“Cannabics”) representing less than 1% of its issued and outstanding share capital as of that day. As of December 31, 2019, the investment amounted to $3. During 2020 the Company sold all of its Cannabics ordinary shares for net proceeds of approximately $260.

|  | During the fourth quarter of 2019, the Company sold 2,238,944 shares of Cannabics through a broker at the amount of $260 (see also Note 4) which were received as of the date of Financial Statements. The Company made a payment of $1 to the broker as a deposit for the Broker’s activity. During 2019 the Company recorded a loss of $501.

| c. | The Company owns 18,822,533 ordinary shares of Bonus representing approximately 1.9% of Bonus’s issued and outstanding share capital as of December 31, 2020. As of December 31, 2020, the fair value of the investment, based on the quoted market price on TASE, amounts to $2,834 and is presented as Marketable equity securities in the accompanying consolidated balance sheet. During 2020 the Company recorded an income from sale of shares and revaluation of $1,197 with respect to this investment, see also Note 10.

NOTE 4:- | OTHER CURRENT ASSETS

|  | December 31, |
|  | 2020 |  |  | 2019 |
Prepaid expenses |  | $ | 15 |  |  | $ | 92 |
Governmental authorities |  |  | 41 |  |  |  | 26 |
Other receivable (Note 3c) |  |  | 10 |  |  |  | 260 |
|  | $ | 66 |  |  | $ | 378 |

NOTE 5:- | 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 (and thereafter, to OcuWize) an exclusive license to purchase, market, sell and distribute a formula known as LO2A (“LO2A”) in the United States 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 CCH and Sjögren’s. Pursuant to the LO2A License Agreement, Wize Israel is required to pay Resdevco royalties for sales in the licensed territories, payable on a semi-annual basis, subject to making certain minimum royalty payments as set forth in the LO2A License Agreement. In January 2020 and January 2021, the Company paid Resdevco royalties in the amount of $150.

Pursuant to the License Agreement, the minimum royalties payable by Wize Israel to Resdevco shall be $150 per year through 2021. A one-time payment to Resdevco by Wize Israel in an amount of $650 shall be due no later than the second anniversary of the receipt of Food and Drug Administration (“FDA”) approval (the “Deferred Amount”); however, following FDA approval, if annual royalties due to Resdevco by Wize Israel exceed the Minimum Royalties (as defined in the License Agreement), an amount equal to 50% of such excess shall be added towards settlement of the Deferred Amount. As to royalty payments, Resdevco shall be entitled to the greater of $0.60 per unit sold, or a percentage of revenues, not to exceed 10%, from sales made in the United States and other countries, excluding Israel, China and Ukraine, but not less than the Minimum Royalties.

The Company has determined not to pursue currently any activities outside the USA until the Company will obtain from Resdevco satisfactory registration file including DES and at least one more indication such as CCH or Sjögren’s. The Company seeks to approve a proposed regulatory strategy acceptable to the Chinese market based on the regulatory files provided.

F-24

WIZE PHARMA 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 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 twelve (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, subject to certain conditions, including, a 180 days prior notice to Resdevco, and penalty payment of $100,000, depending on the timing of termination. The LO2A License Agreement may also 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.

On May 4, 2020, the Company and Resdevco entered into a further amendment to the License Agreement, whereby the parties agreed, among other things, that if (i) within 3 months after we receive a pre-Investigational New Drug (“IND”) with respect to the LO2A, or (ii) in case of proven inability to receive such Pre-IND as a direct result of the COVID-19, in both cases not later than December 31, 2021, we provide Resdevco with a written termination notice, the License Agreement shall be terminated immediately, and to the extent we exercise such termination right before the end of 2021, no minimum royalty fee shall be due for the year 2022.

As of the date of these Financial Statements, the Company had not received FDA approval for LO2A.

See Note 10 below regarding the Company’s contingent obligation for the payment of 37% of the future Lo2A proceeds.

As of December 31, 2020, the Company has recognized a liability of $250, representing the minimum commitment to pay royalties to Resdevco based on the upcoming January 2021 payment in an amount of $150 and an amount of $100 which represents a termination fee payable to Resdevco if the Company exercises its right to terminate the License Agreement.

As of December 31, 2020 and 2019, the current liability to pay future royalties amounts to $250 (for additional information and minimum royalties see also Note 6).

NOTE 6:- | LICENSE PURCHASE OBLIGATION

| a. | In July 2017, Wize Israel and Resdevco amended the License Agreement pursuant to which the annual royalties amount of $475 were reduced to $150 for 2018 and 2019. In addition, If Wize Israel would have obtained an FDA marketing license during 2019, the Company was also required to pay Resdevco the remainder of the payment of 2019, however, such approval was not achieved in 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, which was paid during the third quarter of 2018. In addition, during the third quarter of 2018 and 2019, the Company has recognized an amount of $150 as a liability in respect to the 2019 and 2020, respectively, minimum commitment. Such amount was reflected as an expense under research and development expenses in 2018 and 2019 as applicable. In February 2019, the Company and Resdevco agreed that the Company shall pay Resdevco minimum yearly payments of $150,000 per year through 2021, and thereafter annual payments of $475,000 per year, and shall pay Resdevco $650,000 within two years after receipt of FDA approval for eye drops utilizing the licensed technology.

| b. | 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, |
|  | 2020 |  |  | 2019 |
Repayment dates: |  |  |  |  |  |
January 1, 2020 |  | $ | - |  |  | $ | 250 |
January 1, 2021 (see to Note 5) |  |  | 250 |  |  |  | - |
Remaining balance |  |  | 250 |  |  |  | 250 |
Current liability |  |  | 250 |  |  |  | 250 |
Non-current liability |  |  | - |  |  |  | - |
Total |  | $ | 250 |  |  | $ | 250 |

F-25

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 7:- | ACCOUNTS PAYABLE

|  | December 31, |
|  | 2020 |  |  | 2019 |
Employees and payroll accruals |  | $ | 475 |  |  | $ | 87 |
Liability to HCW, see Note 10 |  |  | 700 |  |  |  | - |
Accrued expenses |  |  | 131 |  |  |  | 278 |
Trade payables |  |  | - |  |  |  | 4 |
|  | $ | 1,306 |  |  | $ | 369 |

NOTE 8:- | CONVERTIBLE LOANS

On March 20, 2016, Wize Israel entered into an agreement (as amended, 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 at 2016 loan originate 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. Regarding the modifications of the maturity date of the 2016 Loan on October 2018, March 2019 and May 2019, see also Note 8a, 8b, 8c and 8d. Regarding loan extinguishment, refer to Note 8e.

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 at 2016 loan origination date), into Wize Israel ordinary shares at a conversion price of NIS 15.2592 per share (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, the aggregate principal amount of the 2016 Loan was adjusted to $531 and the conversion price per share for the 2016 Loan was adjusted to $0.9768.

In addition, under the 2016 Loan Agreement, as modified by the 2017 Loan Agreement and the 2017 Loan Amendment, Rimon Gold had 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 (as defined in the Agreement and Plan of Merger with Bufiduck Ltd., a company formed under the laws of the State of Israel and our wholly owned subsidiary and Wize Israel) 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 $1.308 (subject to adjustments in case of stock splits or similar events).

Rimon Gold was entitled, under certain circumstances, to demand repayment of the 2016 Loan subject to certain conditions. However, as described in note 8e below the convertible loan was extinguished in November 2019.

On January 15, 2017, Wize Israel entered into the loan agreement (the “2017 Loan Agreement”, and together with the 2016 Loan Agreement the “Loan Agreements”) 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 2017 Lenders extended a loan in the principal amount of up to NIS 1 million (approximately $274 according to an exchange rate at 2017 loan originate date) and in the aggregate principal amount of up to NIS 3 million (approximately $822 according to an exchange rate at 2017 loan originate 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, the 2017 Loan had a maturity date of December 31, 2018. Regarding the modification of the maturity date of the 2017 loan in October 2018, March 2019 and May 2019, see also Note 8b, 8c and 8d. Regarding loan extinguishment, refer to Note 8e.

F-26

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 8:- | CONVERTIBLE LOANS (Cont.)

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 at 2017 loan originate 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 private placement agreement, dated June 23, 2017 between Wize Israel, and certain investors (see also Note 12b to the 2018 consolidated Financial Statements), 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, the aggregate principal amount of the 2017 Loan was adjusted to $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, the 2017 Lenders had the right (the “2017 Investment Right”, and together with the 2016 Investment Right the “Investment Rights”), 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).

Ridge was entitled, under certain circumstances, to demand repayment of the 2017 Loan subject to certain conditions. However, as described in note 8e below, the convertible loan was extinguished on November 2019. On April 21, 2019, Ridge transferred the loan and the 2017 Investment Right to Mobigo Inc, a company wholly owned by the Company’s CEO, Noam Danenberg (“Mobigo”). Mr. Danenberg waived a debt owed to him directly by Ridge (that did not involve the Company) as consideration for these derivative securities.

| a. | 2017 Loan Amendment

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 per Company’s share 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.

Accordingly, each of the modified financial instruments was 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 2017 Loan amendment was accounted for as an extinguishment.

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WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 8:- | CONVERTIBLE LOANS (Cont.)

| b. | 2018 Loan Amendment

In connection with the Purchase Agreement (as defined below), on October 19, 2018, the Company and Wize Israel entered into an amendment to the convertible loans outstanding as of that date (the “2018 Loan Amendment”). Pursuant to the 2018 Loan 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 dated October 22, 2018 (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 Series A Warrants, are registered for resale for investors who are not a party to the 2018 Loan 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 2018 Loan Amendment, the expiration date of the Investment Rights under the 2016 Loan Agreement and the 2017 Loan Agreement was amended to be 180 days after the Loan Agreements maturity date.

The 2018 Loan Amendment was accounted for as an extinguishment on October 19, 2018.

According to ASC 470-50, each of the modified financial instruments were measured at fair value. Then, 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 $2,314 was allocated to the 2016 Loan and its related right to future investment and an aggregate amount of $3,286 was allocated to the 2017 Loan and its related right to future investment.

The difference between the Reacquisition Price that was allocated to the Right to Future Investment amounting to $874 which was included in the 2016 Loan and its fair value as of that date amounting to $764 was recorded directly to additional paid in capital (as a deemed dividend in an amount of $110). In addition, the Reacquisition Price that was allocated to the Right to Future Investment amounting to $1,336 which was included in the 2017 Loan and its fair value as of that date amounting to $1,154, was recorded directly to additional paid-in capital (as a deemed dividend in an amount of $182). The difference between reacquisition price that was allocated to the 2017 Loan and to the 2016 Loan, respectively and their respective carrying value of the 2017 Loan and 2016 Loan was recorded as a loss on extinguishment amounting to $1,709 of the 2017 Loan and 2016 Loan.

The 2018 Loan Amendment became effective in the fourth quarter of 2018 and all of the accounting effects were recognized in the fourth quarter of 2018.

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WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 8:- | CONVERTIBLE LOANS (Cont.)

| c. | March 2019 Loan Amendment

On March 4, 2019, the Company and Wize Israel entered into another amendment to convertible loan agreements (the “March 2019 Amendment”) with Rimon Gold, Ridge and Fisher. Pursuant to the March 2019 Amendment, the maturity date under the (i) 2016 Loan Agreement, and (ii) 2017 Loan Agreement were extended to May 31, 2019 from March 4, 2019. The parties also agreed that Rimon Gold’s, Ridge’s and Fisher’s remaining 2016 Investment Rights (as of that date) under the 2016 Loan Agreement to invest up to $512.8, in the aggregate, at $1.308 per share, and the expiration date of Rimon Gold’s, Ridge’s and Fisher’s remaining 2017 Investment Rights (as of that date) under the 2017 Loan Agreement to invest up to $663.4, in the aggregate, at $1.332 per share, be extended from June 30, 2019 to November 30, 2019.

The March 2019 Amendment was accounted for as an extinguishment on March 4, 2019. Until that date, the 2017 Loan and the 2016 Loan were being accounted for under the terms of the 2018 Loan Amendment discussed above.

According to ASC 470-50, each of the modified financial instruments were measured at fair value on the extinguishment date. Then, 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 $986 was allocated to the 2016 Loan and its related right to future investment and an aggregate amount of $1,423 was allocated to the 2017 Loan and its right to future investment.

The difference between the Reacquisition Price that was allocated to the Right to Future Investment amounting to $237 which was included in the 2016 Loan and its fair value as of that date amounting to $192 was recorded directly to additional paid-in capital (as a deemed dividend in an amount of $45). In addition, the Reacquisition Price that was allocated to the Right to Future Investment amounting to $348 which was included in the 2017 Loan and its fair value as of that date amounting to $289, was recorded directly to additional paid-in capital (as a deemed dividend in an amount of $59). The difference between reacquisition price that was allocated to the 2017 Loan and to the 2016 Loan, respectively and their respective carrying value of the 2017 Loan and 2016 Loan was recorded as gain on extinguishment amounting to $48 of the 2017 Loan and 2016 Loan.

| d. | May 2019 Amendment

On May 31, 2019, the Company and Wize Israel entered into an additional extension to convertible loan agreements (the “May 2019 Amendment”) with Rimon Gold, Noam Danenberg and Fisher. Pursuant to the May 2019 Amendment, the maturity date under the (i) 2016 Loan Agreement, and (ii) 2017 Loan Agreement was extended to November 30, 2019 from May 31, 2019 (as previously described under the March 2019 Amendment). The parties also agreed that the expiration date of Rimon Gold’s, Mr. Danenberg’s and Fisher’s remaining 2016 Investment Rights (as of that date) under the 2016 Loan Agreement to invest up to $512.8, in the aggregate, at $1.308 per share, and Rimon Gold’s, Mr. Danenberg’s and Fisher’s remaining 2017 Investment Rights (as of that date) under the 2017 Loan Agreement to invest up to $663.4, in the aggregate, at $1.332 per share, be extended from November 30, 2019 to May 31, 2021. As consideration for extending the maturity date of the loans, the Company issued to Rimon Gold, Mr. Danenberg (through Mobigo, his wholly owned company), and Fisher two-year warrants to purchase an aggregate of 868,034 shares of Common Stock at a fixed price of $1.10 per share.

The May 2019 Amendment was accounted for as an extinguishment on May 31, 2019. Until that date, the 2017 Loan and the 2016 Loan were being accounted for under the terms of the March 2019 Loan Amendment discussed above.

According to ASC 470-50, each of the modified financial instruments were measured at fair value on the extinguishment date. Then, 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 $1,015 was allocated to the 2016 Loan and an aggregate amount of $1,498 was allocated to the 2017 Loan and its related right to future investment.

The difference between the Reacquisition Price that was allocated to the Right to Future Investment amounting to $94 which was included in the 2016 Loan and its fair value as of that date amounting to $61 was recorded directly to additional paid-in capital (as a deemed dividend in an amount of $33). In addition, the Reacquisition Price that was allocated to the Right to Future Investment amounting to $139 which was included in the 2017 Loan and its fair value as of that date amounting to $91, was recorded directly to additional paid-in capital (as a deemed dividend in an amount of $48). The difference between reacquisition price that was allocated to the 2017 Loan and to the 2016 Loan, respectively and their respective carrying value of the 2017 Loan and 2016 Loan was recorded as loss on extinguishment amounting to $926 of the 2017 Loan and 2016 Loan.

F-29

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 8:- | CONVERTIBLE LOANS (Cont.)

| e. | November 2019 Amendment

Effective November 29, 2019, the Company and Wize Israel entered into an amendment to convertible loan agreements (the “November 2019 Amendment”) with Rimon Gold, Mobigo and Fisher.

Pursuant to the November 2019 Amendment, the Company repaid in cash approximately $760 of the $1,520 ($1,353 of principal and $167 accrued interest) outstanding under the loans on November 29, 2019 and Rimon Gold, Mobigo, and Fisher agreed to convert the remaining outstanding amounts of the loans at a later date. On December 13, 2019, the Company issued to Rimon Gold, Mobigo, and Fisher an aggregate of 2,816,196 shares of Common Stock upon conversion of the loans at a reduced conversion price of $0.27 per share and issued the December 2019 Warrants to purchase an aggregate of 5,632,392 shares of Common Stock at an exercise price of $0.27.

The December 2019 Warrants have a term of five years and will be exercisable five days following the public announcement of positive clinical data results for LO2A. In addition, the parties agreed that effective December 13, 2019, the exercise price or conversion price of all other convertible securities (rights for future investment) previously issued to Rimon Gold, Mobigo, and Fisher in connection with the loans (the “Existing Convertible Securities”) shall be adjusted to $0.27 per share and that the aggregate number of shares of Common Stock issuable upon exercise or conversion of a lender’s Existing Convertible Securities shall be reduced in accordance with the percent of such lender’s conversion of its outstanding loan. In addition, it was agreed that in any case when the exercise price of the October 2018 Warrants is reduced as a result of dilutive issuance to an exercise price lower than the exercise or conversion price of the Investment Rights granted under the Loan Agreements, than the exercise or conversion price of the Investment Rights shall be reduced to the new October 2018 Warrants exercise price (“New Exercise Price”). As of December 31, 2019, the New Exercise Price of such Investment Rights was $0.16. See Note 13n regarding the modification of the exercise price of such warrants and their exercise into ordinary shares.

The difference between the aggregate reacquisition price of the loans (i.e, the cash, the fair value of the shares and the December 2019 Warrants and the incremental fair value related to the existing convertible loans) approximate $1,619 and the carrying amount of the convertible loans (principal and accrued interest) was recognized as a loss from extinguishment in an amount of $99 as part of financial income (expense)

Management considered the provisions of ASC 815-40 and has determined that the December 2019 Warrants are considered indexed to the Company’s stock and that all other relevant criteria required for equity classifications are met. Accordingly, it was determined that the December 2019 Warrants are eligible for equity classification.

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WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 8:- | CONVERTIBLE LOANS (Cont.)

| e. | November 2019 Amendment

The below table describes the roll forward of 2017 Loan and 2016 Loan for the year ended December 31, 2019:

|  | December 31, |
|  | 2019 |
Opening balance (including accrued interest) |  | $ | 2,635 |
Amortization of premium related to convertible loans prior to 2018 modification |  |  | - |
Amortization of premium related to convertible loans following 2018 modification |  |  | (641 | )
Derecognition of carrying amount of 2016 Loan and 2017 Loan upon extinguishments – March 2019 modification |  |  | (1,873 | )
Accrued interest on 2017 Loan and 2016 Loan |  |  | 45 |
Amount allocated to 2016 Loan and 2017 Loan based on modified terms – March 2019 modification |  |  | 1,767 |
Amortization of premium related to convertible loans following March 2019 modifications |  |  | (413 | )
Derecognition of carrying amount of 2016 Loan and 2017 Loan upon extinguishments – May 2019 extension |  |  | (1,353 | )
Amount allocated to 2016 Loan and 2017 Loan based on modified terms – May 2019 extension |  |  | 1,556 |
Amortization of premium related to convertible loans – May 2019 extension |  |  | (203 | )
November 2019 repayment in cash and Common Stock |  |  | (1,520 | )
Ending balance |  | $ | - |

NOTE 9:- | SHORT TERM LOAN PAYABLE

On July 15, 2020, OcuWize entered into a loan agreement with Bank Hapoalim (the “Bank”), whereby the Bank extended a loan in the principal amount of NIS 850 (approximately $247) (the “2020 Loan”), which is presented as a short term loan payable in the consolidated balance sheet. The 2020 Loan bears interest at an annual rate of 5.45%, which is paid in monthly payments. The 2020 Loan has a maturity date of January 15, 2021. In order to secure its obligations and performance pursuant to the 2020 Loan, OcuWize recorded a pledge in favor of the Bank and agreed that at all times, the value of all the assets in the OcuWize bank account will not be less than NIS 1,700 (approximately $496). In order to satisfy this requirement, the Company loaned to OcuWize a portion of the Bonus Shares held by it. The 2020 Loan including interest was fully paid on January 14, 2021.

F-31

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 10:- | SIGNIFICANT TRANSACTIONS

| a. | 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 to the Company (the “LO2A Shares”), the right to receive 37% of future LO2A Proceeds (if any), which, as more fully defined in the Bonus Exchange Agreement, include 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 were deposited directly into an escrow account (the “Bonus Escrow Account”), of which (i) $500 was paid to Bonus as an advance promptly following execution of the Bonus Purchase Agreement, (ii) $3,200 was 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 was 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 were 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”).

In addition, pursuant to the Bonus Agreements (as amended as of June 24, 2020), Bonus agreed to cover nearly 50% of the Company’s fees and expenses payable by the Company in cash, Bonus shares and/or a combination thereof to H.C. Wainwright & Co., LLC (“HCW”) in connection with the transactions contemplated by the Bonus Agreements and the Series B Purchase Agreement (as defined below). In particular, Bonus agreed to reimburse the Company or pay HCW directly $350 in cash, Bonus shares and/or a combination thereof.

Regarding the release of the remaining escrow amount of $3,700 to the Series B investors upon settlement agreement between the parties, see below.

According to the Bonus Agreements, as amended, the total number of Bonus Shares issuable to the Company (including the shares to be released at the Milestone Closing) was 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 represented (on a post-issuance basis) approximately 12% of the outstanding share capital of Bonus. The fair value of Bonus shares based on a quote of the share price on January 9, 2020, the date of signing the Bonus Agreements, was $0.12 per share and, as of the date of the closing was $0.11 per share.

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WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 10:- | SIGNIFICANT TRANSACTIONS (Cont.)

| a. | The Bonus/LO2A Transaction:

The transactions contemplated by the Bonus Agreements were completed on February 19, 2020.

As of the date of closing of the Bonus Agreements, the Company received 85,239,000 of Bonus Shares. Pursuant to the Bonus Agreements, an additional 28,413,000 Bonus Shares were to be released to the Company upon the Nasdaq Listing 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, Bonus 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 Agreements 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 an escrow account was recognized as financial liability, representing the Company’s obligation to Bonus with respect to the LO2A Proceeds in an amount of $5,059 (see Note 2v).

On November 29, 2020, the Company entered into an Addendum (the “Addendum”) with Bonus, whereby the parties agreed to amend certain provisions of the Bonus Agreements. Under the Addendum, at the Closing, Bonus will issue to the Company ordinary shares of Bonus (the “Bonus Shares”), the total number of which consists of (i) the Milestone Settlement Shares, which, as defined in the Addendum, means Bonus Shares equal to the quotient obtained by dividing $500 expressed in NIS (based on the exchange rate set in the Addendum) by NIS 0.50, and (ii) the HCW Settlement Shares (together with the Milestone Settlement Shares, the “Settlement Shares”), which, as defined in the Addendum, means Bonus Shares equal to the quotient obtained by dividing $350 expressed in NIS (based on the exchange rate set in the Addendum) by NIS 0.50.

In consideration for the Settlement Shares, the Company agreed to make certain amendments to the Bonus Agreements, including the following key modifications: (i) the Company will waive the requirement that Bonus will effect the Nasdaq Listing and, in relation thereto, conduct the Milestone Closing (as defined in the Bonus Agreements), which means that, at the Closing, $3.7 million will be released from an existing escrow account to Bonus, whereas the 28,413,000 Bonus Shares held in such escrow (the “Nasdaq Milestone Shares”) will be released to the Company (20% of the shares) and to the Company’s former holders of Series B Preferred Stock (the “Former Series B Holders”); (ii) the Company will waive approximately $120 in liquidated damages that accrued as a result of the delay in effecting the Nasdaq Listing; and (iii) Bonus agreed to extend the period for the Company to create, and cause its Israeli subsidiaries 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.

The Closing was subject to customary conditions, including obtaining the approval of the Tel-Aviv Stock Exchange (“TASE”), and occurred on December 30, 2020. It should be noted that, in accordance with the Securities Purchase Agreement, dated January 9, 2020 (as amended), by and among the Company and the Former Series B Holders, the Company was required to transfer 80% of the Milestone Settlement Shares and 80% of the Nasdaq Milestone Shares to such investors.

In addition, during the period from completion of the Bonus Agreements (February 19, 2020) and through December 31, 2020, the Company recognized financial income from both sales of Bonus marketable securities and revaluation of its remaining investment in Bonus marketable securities as of December 31, 2020, in an amount of $1,197 due to the change in the quoted market price of these shares on TASE. Such amount was presented as part of financial expenses, net.

During the year ended December 31, 2020, the Company received cash proceeds of $821 from sales of 5,871,260 of Bonus Shares, which are marketable securities.

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WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 10:- | SIGNIFICANT TRANSACTIONS (Cont.)

| b. | 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 $1.00 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 paid directly 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.

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 were 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 entitled 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 had 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 was 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 Nasdaq Listing, an amount of $3,700 was required to remain in an escrow account and, upon the failure of such listing by Bonus by the Milestone End Date, such amount shall be required to be released in its entirety to the Series B investors. This escrow account of $3,700 was presented as restricted deposit in the Company’ consolidated balance sheet commencing upon the closing of the transaction and until December 29, 2020, following the Addendum with Bonus described in Note 10a above, and the same amount was reflected as part of the liability with respect to the mandatorily redeemable series B preferred Stock.

As of the completion date (February 19, 2020), the Company recognized a liability in light of its obligation to redeem the 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 (which, in case the Milestone Closing will not be met, will be paid to the Series B investors) and 80% of the Company’s investment in Bonus marketable shares, see Note 3.

F-34

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 10:- | SIGNIFICANT TRANSACTIONS (Cont.)

The difference between the amount of the liability recognized with respect to the 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 financial expense, net upon the completion of the Bonus agreement and the Series B Purchase Agreement, within financial income (loss), net.

In addition, from the date of the completion of the Bonus agreements and until the redemption, the Company recognized a loss in an amount of $597, net due to the revaluation of the mandatorily redeemable Series B Preferred Stock liability.

On July 8, 2020, the Company elected to redeem all of the Series B Preferred Stock. As a result, the Company distributed 68,191,200 Bonus Shares representing an amount of $6,597 to the holders of Series B Preferred Stock representing 80% of the Bonus shares then held by the Company. As a result of such distribution, as of the date of these financial statements, the Company owns the remaining 18,822,533 Bonus Shares, representing approximately 1.61% of the outstanding shares of Bonus.

As discussed above, on November 29, 2020, the Company entered into an Addendum (the “Addendum”) with Bonus, whereby, among other things, Bonus agreed to issue to the Company’s ordinary shares of Bonus (the “Bonus Shares”), the total number of which consists of (i) the Milestone Settlement Shares, which, as defined in the Addendum, means Bonus Shares equal to the quotient obtained by dividing US$500 expressed in NIS (based on the exchange rate set in the Addendum) by NIS 0.50, and (ii) the HCW Settlement Shares (together with the Milestone Settlement Shares, the “Settlement Shares”), which, as defined in the Addendum, means Bonus Shares equal to the quotient obtained by dividing US$350 expressed in NIS (based on the exchange rate set in the Addendum) by NIS 0.50. In consideration for the Settlement Shares, the Company agreed to make certain amendments to the Bonus Agreements, including the following key modifications: (i) the Company will waive the requirement that Bonus will effect the Nasdaq Listing and, in relation thereto, conduct the Milestone Closing, which means that US$3.7 million were released from an existing escrow account to Bonus, whereas the 28,413,000 Bonus Shares held in such escrow (the “Nasdaq Milestone Shares”) were released to the Company and to its former holders of Series B Preferred Stock (the “Former Series B Holders”); (ii) the Company will waive approximately US$120 in liquidated damages that accrued as a result of the delay in effecting the Nasdaq Listing; and (iii) Bonus agreed to extend the period for the Company to create, and cause its Israeli subsidiaries to create, certain first priority liens in favor of Bonus to secure obligations under the Bonus Exchange Agreement, including certain related negative covenants. The closing occurred on December 29, 2020. It should be noted that, in accordance with the obligations of the Company to the Former Series B Holders (see below), the Company has transferred 80% of the Milestone Settlement Shares and 80% of the Nasdaq Milestone Shares to such investors. As a result of the transactions above, the Company redeemed all of the outstanding shares of Series B Preferred Stock, and had satisfied its obligation under the Series B Preferred Stock.

As a result of the Bonus transaction, the company received an aggregate amount of 119,294,300 Bonus shares, out of which a total number of 93,576,800 Bonus shares were distributes to the holders of Series B Preferred Stock.

The below table describes the roll forward of Mandatorily Redeemable Series B liability for the year ended December 31, 2020:

|  | December 31, |
|  | 2020 |
Opening balance |  | $ | - |
Series B Preferred Stock issued |  |  | (7,500 | )
Loss from initial recognition of mandatorily redeemable Series B Preferred Stock at fair value |  |  | (3,207 | )
Revaluation of mandatorily redeemable Series B Preferred Stock |  |  | (597 | )
Redemption of mandatorily redeemable Series B Preferred Stock with Bonus Shares |  |  | 7,604 |
Extinguishment of mandatorily redeemable Series B Preferred Stock by release of escrow account |  |  | 3,700 |
Ending balance |  | $ | - |

| c. | The Cosmos Transaction:

On December 30, 2020, the Company or “Wize”, entered into a Bid Implementation Agreement (the “Bid Agreement”) with Cosmos Capital Limited, a digital infrastructure provider based in Sydney, Australia (“Cosmos”), whereby the parties agreed that the Company would commence an off-market takeover offer under applicable Australian laws (the “Offer”) to acquire all of the outstanding shares of Cosmos in exchange for common shares of the Company. For more information, about the Cosmos transaction, CVR agreement and PIPE Agreements, see Note 16 below.

F-35

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 11:- | 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 previous rates that ranged from 15% to 39% 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 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.

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 December 31, 2020. The provisional amount related to the re-measurement of the Company’s 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 39% 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.

| b. | Tax rates applicable to Wize Israel and OcuWize:

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%.

Accordingly, taxable income of the Israeli Subsidiary is subject to the Israeli Corporate tax rate,which was 23% in 2020 and 2019.

| c. | Net operating loss carry forward:

As of December 31, 2020, the Company has NOL carry forwards for federal income tax purposes of approximately $7,570. The application of the NOL carry forwards is limited due to IRC section 382 limitation. The annual NOL carry forward (pre-merger, approximately $4,784) is limited to $10.965 per year. The balance as of December 31, 2020 of the NOL carry forwards of approximately $4,786 is available in full.

As of December 31, 2020, the Company’s subsidiaries, Wize Israel and OcuWize have accumulated losses for tax purposes in the amount of approximately $5,476 and $5,366 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, 2020, Wize Israel’s 2011 tax assessment was considered final. OcuWize has not received final tax assessment since its inception.

F-36

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 11:- | TAXES ON INCOME (Cont.)

| e. | Loss before taxes on income consists of the following:

|  | December 31, |
|  | 2020 |  |  | 2019 |
Domestic |  | $ | (1,318 | ) |  | $ | (1,709 | )
Foreign (*) |  |  | (10,842 | ) |  |  | (9,613 | )
|  | $ | (12,160 | ) |  | $ | (11,322 | )

| (*) | Relates to Wize Israel and OcuWize.

| 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, |
|  | 2020 |  |  | 2019 |
Deferred tax assets: |  |  |  |  |  |  |  |
Operating loss carry forwards |  | $ | 2,899 |  |  | $ | 2,974 |
Reserves and allowances |  |  | 5 |  |  |  | 6 |
Research and development |  |  | 261 |  |  |  | 128 |
Net deferred tax asset before valuation allowance |  |  | 3,165 |  |  |  | 3,108 |
Valuation allowance |  |  | (3,165 | ) |  |  | (3,108 | )
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 NOLs are utilized. Based on consideration of these factors, the Company recorded a full valuation allowance at December 31, 2020 and 2019.

| 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, |
|  | 2020 |  |  | 2019 |
Loss before taxes on income, as reported in the statements of comprehensive loss |  |  | (4,929 | ) |  |  | (3,450 | )
Theoretical tax benefit on this loss |  |  | 1,035 |  |  |  | 725 |
Expenses not deductible for tax purposes |  |  | (52 | ) |  |  | (86 | )
Increase in taxes resulting mainly from taxable losses in the reported year for which no net deferred tax assets were recognized |  |  | (983 | ) |  |  | (639 | )
Tax benefit |  |  | - |  |  |  | - |

F-37

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 12:- | COMMITMENTS AND CONTINGENCIES

|  | Agreements:

| 1. | Starting November 22, 2020, the Company rents its offices from a third party for a rental monthly fee of $2. The rent period is for a period of 12 months.

| 2. | For the Company’s engagement in a License Agreement to market a drug and amendment to such an agreement, see also Notes 5 and 6 above.

| 3. | 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 service provider will be entitled to the finder fee of 5% even if the agreement will be terminated. The Vendor introduced Wize Israel and the Company to the Chinese Distributor (see also Note 5). During the period commencing the Effective Date and ending December 31, 2019 and 2020, the Vendor has not earned any royalties, and the Company has no obligation to pay any royalties.

| 4. | For discussion regarding Bonus transaction, see Note 10 above.

NOTE 13:- | 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.

F-38

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 13:- | STOCKHOLDERS’ EQUITY (Cont.)

| b. | On February 7, 2019, the Company entered into a joint venture agreement with Cannabics traded on the Over-The-Counter (OTC) markets in the United States. Pursuant to the agreement, the parties agreed to form a new joint venture company for the purpose of researching, developing and administering cannabinoid formulations to treat ophthalmic conditions. The new company will initially be owned 50% each by the Company and Cannabics. On March 1, 2019, the Company’s joint venture agreement with Cannabics became effective. Pursuant to the terms of the agreement, the Company issued to Cannabics 900,000 shares of its Common Stock and Cannabics issued to the Company 2,263,944 shares of Cannabics’ common stock, which represented a holding percentage less than 5 percent of Cannabic’s then outstanding share capital. The joint venture currently has no assets or liabilities and has not started conducting any of its planned operations. In connection with the foregoing, the Company relied upon the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, for transactions not involving a public offering. As a result of the share issuance, the Company recorded an amount of $765 as an increase to Common Stock (at par value) and additional paid-in capital with a corresponding amount of $765 as an investment in marketable securities. Such amount was based on the fair value of Cannabics’ shares as of the date at which the agreement became effective. The investment in marketable securities was remeasured in subsequent periods at fair value with changes carried to profit or loss. During the year ended December 31, 2019 the Company recognized loss of $501 due to the change in fair value from March 1, 2019 to December 31, 2019. On November 13, 2019, the Company determined to terminate all activities under the joint venture until such time as the parties jointly determine that no uncertainty remains with respect to U.S. federal enforcement of the cannabis industry.
| c. | In March 2019, the Company issued 60,000 shares of Common Stock to certain investors in exchange for conversion of 60 shares of Preferred A stock, which was in accordance with the terms of the Purchase Agreement.

| d. | In April 29, 2019, the Company issued 336,000 shares of Common Stock to certain investors in exchange for conversion of 336 shares of Preferred A stock, which was in accordance with the terms of the Purchase Agreement. In May 7, 2019, the Company issued 336,000 shares of Common Stock to certain investors in exchange for conversion of 336 shares of Preferred A stock, which was in accordance with the terms of the Purchase Agreement.
| e. | On April 23, 2019, the Company’s Board appointed Mark Sieczkarek as the Company’s Chairman of the Board (the “Chairman Appointment”).
| f. | On July 18, 2019, the Company issued to a consultant, 6,945 shares of Common Stock in exchange for its services provided in the three months ended September 30, 2019. The Company recognized an amount of $3 in the year ended December 31, 2019.

| g. | On August 20, 2019, the Company issued to a consultant, 45,000 shares of Common Stock in exchange for its services provided in 2019. The Company recognized an amount of $18 in the year ended December 31, 2019.

F-39

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 13:- | STOCKHOLDERS’ EQUITY (Cont.)

| h. | In connection with Mr. Sieczkarek’s appointment, the Company and Mr. Sieczkarek entered into a Chairman Agreement (the “Chairman Agreement”) whereby Mr. Sieczkarek shall receive 202,399 restricted stock units (“RSUs”) and options to purchase 102,222 shares of the Company’s Common Stock at an exercise price of $2.00 per share (the “Chairman Awards”). The Chairman Awards shall vest 1/8 on the effective date of the Chairman Agreement and subsequently in seven equal quarterly installments commencing July 1, 2019. The Chairman Agreement has an initial term of two years (the “Term”) and provides that in the event of a change of control (as defined in the Chairman Agreement) the Chairman Awards shall automatically vest in full as of that date. The Chairman Agreement also contains standard representations and warranties regarding confidential information, non-competition and non-solicitation. Total value of the options granted is $29, which is recorded quarterly over the vesting period. The total value of the share based expense related to the RSU is $185, which is being recognized ratably over the vesting period. On August 11, 2020, the Company’s Board of Directors approved the equity grant of 150,000 restricted stock units vesting quarterly over a period of two years to the Chairman of the Board of Directors of the Company, see also note 13p below. On January 6, 2020, April 15, 2020, July 1, 2020 and October 1, 2020 the Company issued 25,300, 25,300, 25,300 and 44,050, respectively, shares to the Chairman pursuant to the agreement above following the vesting of certain portions of the RSUs. The Company recognized $46 during the year ended December 31, 2020 as a share-based expense in connection to the RSU’s and options granted.

| i. | In April 2019, Mr. Danenberg purchased directly from Ridge all Ridge’s rights under the second convertible loan agreement.

| j. | On May 14, 2019, the Company issued to a consultant, 135,000 shares of restricted Common Stock which is due and issuable according to the following schedule: 25% as of May 1, 2019 and additional 25% every quarter following May 1, 2019. The aggregate fair value of these shares of RSUs at grant date issued was $106, and is being recognized over a period of 1 year following May 1, 2019. The Company recognized $104 and $2 during the years ended December 31, 2019 and 2020, respectively as a share-based expense in connection to the RSU’s.

| k. | On May 15, 2019, the Company granted to a consultant, 10,000 fully vested RSUs. The Company determined the fair value of the RSUs to be the quoted market price of the Company’s Common Stock on the date of issuance. The aggregate fair value of these RSUs issued at grant date was $5, and was recognized during the year ended December 31, 2019.

F-40

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 13:- | STOCKHOLDERS’ EQUITY (Cont.)

| l. | On May 19, 2019, the Company granted to one of its directors certain options exercisable into 30,000 shares of Common Stock with an exercise price of $0.58 per share. The options will vest monthly over a period of six (6) months. The Company recognized $13 of share-based compensation expense during year ended December 31, 2019.

| m. | On December 13, 2019, the Company issued to Rimon Gold, Mobigo, and Fisher an aggregate of 2,816,196 shares of Common Stock as part of the extinguishment of the loans, see also Note 8e.

| n. | On December 20, 2019, the Company entered into a securities purchase agreement (the “2019 Purchase Agreement”) with an accredited investor. Pursuant to the 2019 Purchase Agreement, the Company agreed to sell to the investor, and the investor agreed to purchase from the Company, in a private placement, an aggregate of 2,037,037 shares of Common Stock for a purchase price of $0.27 per share, for aggregate gross proceeds under the 2019 Purchase Agreement of $550. The Company also agreed to issue to the investor the December 2019 Warrants, a five-year warrants to purchase an aggregate of 4,074,047 shares of Common Stock. The December 2019 Warrants have an exercise price of $0.27 per share and will be exercisable five days following the public announcement of positive clinical data results for LO2A. The December 2019 Warrants will be exercisable on a cashless basis in the event that, six months after issuance, there is not an effective registration statement for the resale of the shares underlying the December 2019 Warrants. Management considered the provisions of ASC 815-40, and has determined that the December 2019 Warrants are considered indexed to the Company’s stock and that all other relevant criteria required for equity classification are met. Accordingly, it was determined that the December 2019 Warrants are eligible for equity classification. On December 2019, the December 2019 Warrants exercise price was reduced to $0.16 due to the triggering of certain down-round anti-dilution protection or price protection features included in the original terms of these warrants. The difference between the fair value of the warrants and the incremental fair value resulting from the triggering of the above mentioned features was recognized as a deemed dividend and as an increase of the loss applicable to common stockholders in an amount of $15. See also note 13p and 13q below.

| o. | On August 11, 2020, the Company’s Board of Directors approved the following equity grants: (i) 150,000 restricted stock units vesting quarterly over a period of two years to the Chairman of the Board of Directors of the Company and (ii) 100,000 restricted stock units vesting quarterly over a period of two years to each of the other three non-executive directors. The aggregate fair value of these shares of RSUs at grant date issued was $73, and is being recognized over a period of 2 years following August 11, 2020. The Company recognized $34 during the year ended December 31, 2020, as a share-based expense in connection to the RSU’s.

F-41

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 13:- | STOCKHOLDERS’ EQUITY (Cont.)

| p. | On December 8, 2020, the Company entered into exchange agreements (the “Exchange Agreements”) with certain holders (the “Series A Holders”) of 3,000,000 Series A Warrants. Pursuant to the terms of the Exchange Agreements, the Holders agreed to surrender their Warrants for cancellation and received, as consideration for such cancellation, an aggregate of 3,000,000 shares of common stock. The securities issued pursuant to the foregoing are exempt from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section 3(a)(9) and/or Section 4(a)(2) of the Securities Act and/or Rule 506(b) of Regulation D promulgated thereunder because, among other things, the transaction did not involve a public offering and the warrant holders are accredited investors. The difference between the fair value of the warrants before the exchange and the fair value of the shares was recognized as a deemed dividend and as an increase of the loss applicable to common stockholders in an amount of $63.

| q. | On December 24, 2020, the Company entered into an agreement (the “Agreement”) with certain holders (the “Series A Holders”) representing a majority of the Series A Warrants. Pursuant to the terms of the Agreement, the Company and Series A Holders mutually agreed that the Company would voluntarily reduce the exercise price of the Warrants to $0.001 per share until January 7, 2021, after which such exercise price shall revert back to $0.16 per share. As a result of the adjustment to the exercise price of the Series A Warrants, the exercise price of the warrants issued in November 2017 (the “2017 Warrants”), the placement agent warrants issued in October 2018 (the “2018 Placement Agent Warrants”), the warrants issued to certain lenders in May 2019 (the “May 2019 Warrants”), the warrants issued to certain lenders in November 2019 (the “November 2019 Warrants”), the warrants issued to certain purchasers from the private placement in December 2019 (the “December 2019 Warrants”) and certain investment rights issued on January 2017 (the “Investment Rights”) were also adjusted to reflect a reduced exercise price of $0.001 per share (collectively, the “Warrant Adjustments”). As a result of the Warrant Adjustments, on December 29, 2020 an aggregate of 13,332,654 shares of common stock were issued as a result of the exercise of such warrants, each on a cashless basis. Among others, such warrant exercises also included warrants beneficially owned by our Chief Executive Officer, Noam Dannenberg. The difference between the fair value of the warrants before and after the adjustment was recognized as a deemed dividend and as an increase of the loss applicable to common stockholders in an amount of $327.

| r. | Stock based-compensation:

The 2012 Plan

In 2012, the Company’s Board 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 RSUs of the Company. Each Stock option granted shall be exercisable at such times and terms and conditions as the Company’s 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, the Company reserved for issuance 45,370 shares of Common Stock, $0.001 par value each.

As of December 31, 2020, the Company has 40,474 shares of Common Stock available for future grant under the 2012 Plan. As of December 31, 2020, under the 2012 Plan, the Company had options exercisable into 4,896 shares of Common Stock outstanding and exercisable.

The 2018 Plan

On February 22, 2018, the Company’s 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, the Company may grant its employees, directors, consultants and/or contractors’ stock options, shares of Common Stock, restricted stock and RSUs of the Company. The Compensation Committee of the Board 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 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.

F-42

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 13:- | STOCKHOLDERS’ EQUITY (Cont.)

Upon the adoption of the 2018 Plan, the Board reserved for issuance 435,053 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 of Common Stock. In addition, the Board approved to increase the number of shares issuable under the Plan on the first day of each fiscal year beginning with the 2019 fiscal year, by an amount equal to the lesser of (i) 1,000,000 shares or (ii) 5% of the outstanding shares on the last day of the immediately preceding fiscal year.

As of December 31, 2020, the Company has 2,184,813 shares of Common Stock available for future grant under the 2018 Plan.

Through December 31, 2020, 290,222 options to directors, officers and consultants are outstanding.

Grants under the 2018 Plan

| 1. | On April 4, 2018, the Company granted to its officers, directors and a consultant options exercisable into 229,500 shares of Common Stock with an exercise price of $3.59 per share. The options will vest quarterly over a period of 36 months. The Company recognized $51 and $154 during the year ended December 31, 2020 and 2019, respectively.

| 2. | Stock-based compensation: On March 31, 2019, the Company’s Board approved the following:

| 1. | To grant to each of Company’s four directors 100,000 RSUs. The RSUs will vest quarterly over a period of 24 months.

| 2. | To grant to each its officers (Company’s Chief executive officer and to Company’s Chief financial officer) 140,000 RSU’s. The RSU’s will vest quarterly over a period of 24 months.

The Company determined the fair value of the RSUs to be the quoted market price of the Company’s Common Stock on the date of grant. The aggregate fair value of these RSUs issued was $476. The Company is recognizing this amount ratably over the vesting period of 24 months following March 31, 2019.

In connections with the above, on July 25, 2019 (the initial quarterly vesting date) the Company issued 85,000 Common shares to its officers and directors.

The Company recognized $132 and $337 during the year ended December 31, 2020 and 2019 respectively.

F-43

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 13:- | STOCKHOLDERS’ EQUITY (Cont.)

| 3. | On April 18, 2019, the Company granted to its employee, 21,600 options exercisable into 21,600 shares of Common Stock at an exercise price of $0.75 per share of Common Stock. The options began vesting quarterly over a period of 36 months commencing April 18, 2019. The Company recognized $2 during the year ended December 31, 2019 as a share-based expense. The total value of the share based expense is $10, which is recorded quarterly over the vesting period. Since the Company has terminated its employment agreement in December 2019, as of December 31, 2020, all of the options were forfeited.

Transactions related to the grant of options to employees and directors under the 2012 Plan during the year ended December 31, 2020 and 2019, were as follows:

|  | Year Ended December 31, 2020 |
|  | Number of options |  |  | Weighted average exercise price |  |  | Weighted average remaining contractual life |
Options outstanding at beginning of year |  |  | 4,896 |  |  | $ | 190.7 |  |  |  | 3.86 |
Granted |  |  | - |  |  |  | - |  |  |  | - |
Forfeited |  |  | (544 | ) |  | $ | 216 |  |  |  | - |
Options outstanding and exercisable at end of year |  |  | 4,352 |  |  | $ | 81.81 |  |  |  | 3.32 |

|  | Year Ended December 31, 2019 |
|  | Number of options |  |  | Weighted average exercise price |  |  | Weighted average remaining contractual life |
Options outstanding at beginning of year |  |  | 4,896 |  |  | $ | 190.7 |  |  |  | 3.86 |
Granted |  |  | - |  |  |  | - |  |  |  | - |
Options outstanding and exercisable at end of year |  |  | 4,896 |  |  | $ | 190.7 |  |  |  | 2.86 |

F-44

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 13:- | STOCKHOLDERS’ EQUITY (Cont.)

Transactions related to the grant of options to employees and directors under the 2018 Plan during the year ended December 31, 2020 and 2019, were as follows:

|  | Year Ended December 31, 2020 |
|  | Number of options |  |  | Weighted average exercise price |  |  | Weighted average remaining contractual life |
Options outstanding as of December 31, 2019 |  |  | 352,072 |  |  | $ | 2.91 |  |  |  | 5.72 |
Granted |  |  | - |  |  |  | - |  |  |  | - |
Forfeited |  |  | (61,850 | ) |  | $ | 2.97 |  |  |  | - |
Options outstanding as of December 31, 2020 |  |  | 290,222 |  |  | $ | 2.64 |  |  |  | 5.84 |
Options exercisable as of December 31, 2020 |  |  | 255,459 |  |  | $ | 2.56 |  |  |  | 5.82 |

|  | Year Ended December 31, 2019 |
|  | Number of options |  |  | Weighted average exercise price |  |  | Weighted average remaining contractual life |
Options outstanding as of December 31, 2018 |  |  | 255,000 |  |  | $ | 3.68 |  |  |  | 5.55 |
Granted |  |  | 153,822 |  |  |  | 1.55 |  |  |  | 7 |
Forfeited |  |  | (56,750 | ) |  |  | 2.69 |  |  |  | - |
Options outstanding as of December 31, 2019 |  |  | 352,072 |  |  | $ | 2.91 |  |  |  | 5.72 |
Options exercisable as of December 31, 2019 |  |  | 181,799 |  |  | $ | 2.75 |  |  |  | 5.72 |

At December 31, 2020, there was $3 of total unrecognized compensation cost related to non-vested option grants that is expected to be recognized over a weighted-average period of 0.5 years. The intrinsic value of options outstanding and exercisable at December 31, 2020 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 7 years.

F-45

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 14:- | SELECTED STATEMENTS OF OPERATIONS DATA

| a. | General and administrative expenses:

|  | Year ended December 31, |
|  | 2020 |  |  | 2019 |
Overseas travel |  | $ | - |  |  | $ | 103 |
Stock-based compensation |  |  | 246 |  |  |  | 688 |
Rent and office maintenance |  |  | 51 |  |  |  | 49 |
Payroll and benefits |  |  | 834 |  |  |  | 470 |
Professional services and consultation |  |  | 517 |  |  |  | 953 |
Taxes and tolls |  |  | 67 |  |  |  | 24 |
Director salary and insurance |  |  | 177 |  |  |  | 183 |
Others |  |  | 116 |  |  |  | 208 |
|  | $ | 2,008 |  |  | $ | 2,678 |

| b. | Financial expense, net:

|  | Year ended December 31, |
|  | 2020 |  |  | 2019 |
Financial income: |  |  |  |  |  |  |  |
Income from sale and revaluation of marketable securities |  |  | 1,197 |  |  |  | - |
Exchange rate gains, net |  |  | - |  |  |  | 15 |
Gain from completion of milestone closing |  |  | 847 |  |  |  | - |
Gain from settlement shares |  |  | 100 |  |  |  | - |
Amortization of premium related to convertible loans |  | $ | - |  |  |  | 1,257 |
Total financial income |  |  | 2,144 |  |  |  | 1,272 |
Financial expense: |  |  |  |  |  |  |  |
Accrued interest on convertible loans |  |  | - |  |  |  | (45 | )
Accrued interest on loans |  |  | (6 | ) |  |  | - |
Loss from recognition of mandatorily redeemable Series B Preferred Stock |  |  | (3,207 | ) |  |  | - |
Loss from revaluation of contingent obligation with respect to future revenues |  |  | (435 | ) |  |  | - |
Revaluation of mandatorily redeemable Series B Preferred Stock |  |  | (597 | ) |  |  | - |
Bonus transaction costs |  |  | (350 | ) |  |  | - |
Change in the fair value of marketable securities |  |  | - |  |  |  | (527 | )
Bank commissions and exchange rates |  |  | (36 | ) |  |  | (3 | )
Loss from extinguishment of convertible loans (Note 8c, 8d, 8e) |  |  | - |  |  |  | (977 | )
Total financial expense |  |  | (4,631 | ) |  |  | (1,552 | )
Total financial expense, net |  | $ | (2,487 | ) |  | $ | (280 | )

F-46

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 15:- | RELATED PARTIES BALANCES AND TRANSACTIONS

| a. | Balances with interested and related parties:

|  | December 31, |
|  | 2020 |  |  | 2019 |
Other receivables |  | $ | - |  |  | $ | 52 |
Accounts payable |  | $ | 439 |  |  | $ | 104 |
Convertible Loans |  | $ | - |  |  | $ | - |

| b. | Transactions with interested and related parties:

|  | Year ended December 31, |
|  | 2020 |  |  | 2019 |
Amounts charged to: |  |  |  |  |  |
General and administrative expenses* |  | $ | 1,212 |  |  | $ | 1,140 |
Finance expenses, net (income) |  | $ | - |  |  | $ | (625 | )

* Including an amount of $76 with respect to stock-based compensation

F-47

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 16:- | SUBSEQUENT EVENTS

|  | The Cosmos Transaction:

On December 30, 2020, the Company entered into the Bid Agreement with Cosmos, which was subsequently amended on January 18, 2021 for the primary purpose of simplifying the Offer structure. Under the Bid Agreement (as amended), the parties agreed that the Company would commence the Offer, an off-market takeover offer under applicable Australian laws, to acquire all of the Cosmos Shares in exchange for 61.11 Company's shares of common stock for each Cosmos Share, being the Offer Consideration.

Under the Bid Agreement, 22.33 Company shares of common stock out of the Offer Consideration will be “Restricted Stock” subject to a Stock Restriction Agreement to be entered into at the Closing Date and 38.78 Company shares of common stock will be “Covered Securities”. A Cosmos shareholder who accepts the Offer (an “Accepting Shareholder”) will not be permitted to sell or encumber their Restricted Stock until December 31, 2021 (the “Milestone Date”). In addition, an Accepting Shareholders may not exercise voting rights in respect of Restricted Stock from the date of issuance of the Offer Consideration until the Milestone Date. An Accepting Shareholder is entitled to sell or encumber its Covered Securities. However, if (subject to certain limited exceptions) an Accepting Shareholder sells or encumbers any of its Covered Securities before the Milestone Date, the Company has an option to repurchase a pro rata proportion of the Restricted Stock for the lower of $0.0001 and the fair market value of the Restricted Stock. The Restricted Stock (and any dividends thereon) will be held by the Company in escrow for the Accepting Shareholder’s benefit until such time as the Restricted Stock is repurchased by Wize or all restrictions thereon lapse. If any Restricted Stock is repurchased under the Company’s repurchase option, a pro rata proportion of the dividend on the Restricted Stock shall be retained by the Company.

Immediately following the Closing Date, and assuming all of the holders of Cosmos Shares accept the Offer, Cosmos shareholders are expected to own approximately 87.65% of the outstanding common stock of the Company, while the Company's existing stockholders are expected to remain the owners of approximately 10.75% of the outstanding common stock of the Company, each on a fully diluted basis and including warrants to be issued to the Company's financial advisor to the transaction.

Pursuant to the Bid Agreement, prior to the Closing Date, the Company will enter into a Contingent Value Rights Agreement (the “CVR Agreement”) with Cosmos, certain of the Company’s subsidiaries (the “Wize Subsidiaries”), a person designated by the Company prior to the Closing Date as the Holders’ Representative (as defined herein), and the Rights Agent (as defined therein). Pursuant to the CVR Agreement, at the Closing Date, each Wize pre-Closing security holder will receive one non-transferable CVR for each outstanding share of common stock of the Company and for each share of common stock of the Company underlying other convertible securities and warrants, held as of 4:01 p.m. Eastern Time on the day immediately before the Effective Time (as defined in the CVR Agreement). Each CVR will represent the right to receive a pro rata share of any consideration that may be received by the Company or the Company Subsidiaries in connection with the Company’s existing LO2A business. In particular, CVR holders will be entitled to any consideration (whether cash, stock, assets or otherwise) that the Company or the Company Subsidiaries (or any of its Affiliates or shareholders) receives in connection with an LO2A Transaction, which, as defined in the CVR Agreement, includes (i) a sale of any of the Company Subsidiaries to a third party and/or (ii) the partnering, licensing, sublicensing, distribution, reselling or sale of all or any part of the LO2A Technology or LO2A Products to a third party, less transaction expenses and customary deductions as detailed in the CVR agreement, including a deduction of up to $300,000 that the Company Subsidiaries undertook to incur in the development of the LO2A Technology at the request of the Holders’ Representative.

F-48

WIZE PHARMA INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

U.S. dollars in thousands, except share and per share data

NOTE 16:- | SUBSEQUENT EVENTS (Cont.)

The Bid Agreement also contains certain covenants to be performed at or following the Closing Date, including, among others, (i) agreement that the Board of Directors of the Company immediately following the Closing Date will consist, subject to certain exceptions, of three members to be designated by Cosmos and one member to be designated by the Company; (ii) covenants that the Company will seek, following the Closing Date, stockholder approval to be renamed Cosmos Capital, Inc. (or similar name), and to effect a reverse share split of the Company’s common stock; (iii) covenants that the Company will establish an incentive compensation program with respect to 40,000,000 shares of its common stock, to be granted promptly following the Closing Date, in the form of performance-based RSUs, performance rights or indeterminate rights based on the performance milestone criteria and allocation set in the Bid Agreement (the “Post-Closing Incentive Plan”), 50% of which are to be granted to personnel specified by the Company prior to the Closing Date and the remainder to be granted to personnel of Cosmos (see also Item 9B below); (iv) an obligation by the Company to terminate or procure the termination of each of the current employment or consulting agreements of the Company with Mr. Mark Sieczkarek, the Chairman of the Company Board of Directors, Mr. Noam Danenberg, the Chief Executive Officer of the Company, Mr. Or Eisenberg, the Chief Financial Officer of the Company, and another part-time employee related to Mr. Danenberg; and (v) an obligation by the Company to use its reasonable commercial efforts to enter into new, part time, consulting agreements with Mr. Danenberg and Mr. Eisenberg in a form to be agreed between the Company and Cosmos. In this respect, it should be noted that the Company, Cosmos and each of Mr. Danenberg and Mr. Eisenberg agreed on the form of such consulting agreements, whereby Mr. Danenberg and Mr. Eisenberg will provide part time consulting services to the Company following the Closing Date for monthly compensation of US$10,000 and US$7,500, respectively.

Concurrently with the execution of the Bid Agreement, the Company entered into Securities Purchase Agreements (the “PIPE Agreements”) with certain accredited investors (the “PIPE Investors”), including Mr. Noam Danenberg, our CEO. Pursuant to the PIPE Agreements, we agreed to sell to the PIPE Investors, and the PIPE Investors agreed to purchase from us, in a private placement, an aggregate of 25,000,000 shares of common stock for a purchase price of $0.12 per share, or aggregate gross proceeds of $3.0 million, which, in the case of Mr. Danenberg, may be satisfied by waiving outstanding amounts owed by the Company or its subsidiaries to Mr. Danenberg pursuant to his consulting agreement with our subsidiary.

On February 1, 2021, we lodged a Bidder’s Statement with the Australian Securities and Investments Commission to commence the Offer.

On February 15, 2021, Cosmos informed the Company that Cosmos completed the issuance of convertible notes (the “Cosmos Convertible Notes”) with an aggregate principal amount of approximately US$21 million to several non-U.S. sophisticated or professional investors (the “Purchasers”). The Cosmos Convertible Notes are unsecured and shall initially be convertible into shares of Cosmos at a conversion price of AU$23.58 per share (equivalent to US$18.16), reflecting a pre-money valuation of Cosmos of approximately US$185 million. The Cosmos Convertible Notes will automatically convert to shares six months after the date of issuance. Cosmos is obligated to pay interest to the Purchasers on the outstanding principal amount of the Cosmos Convertible Notes at the rate of 8% per annum, payable on the conversion date, in cash or, at Cosmos’ option, in shares of Cosmos. Redemption of the Cosmos Convertible Notes occurs only if an insolvency event occurs in respect of Cosmos.

The Cosmos Convertible Notes also provide that, subject to, among other things, the consummation of the Offer before May 31, 2021, Cosmos will cause the Company to assume the Cosmos Convertible Notes by way of entering into an amended and restate convertible note on substantially the same terms as the Cosmos Convertible Note (the “Wize Convertible Notes”), except that, at such time, they shall be convertible, upon the earlier of six (6) months from the issuance of the Cosmos Convertible Notes and an uplisting of the common stock of the Company to Nasdaq, into shares of common stock of the Company at a conversion price of US$0.339 per share.

Cosmos plans to use the proceeds of the Cosmos Convertible Notes for the purchase of additional application-specific integrated circuit (ASIC) mining hardware, modular data centers, associated infrastructure and capital raising costs.

February 16, 2021, we announced that the Offer became unconditional and that we plan to consummate the transactions contemplated by the Bid Agreement and the Offer on or about March 9, 2021.

F-49

(b) Exhibits

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)
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 |  | 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# |  | Description of Securities
10.1+ |  | 2012 Stock Incentive Plan (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on February 9, 2012)
10.2+ |  | 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)
10.3 |  | Chairman Agreement between the Company and Mark Sieczkarek dated as of April 23, 2019 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on April 29, 2019)
10.4 |  | 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)
10.5 |  | 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)
10.6 |  | 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)
10.7 |  | 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)
10.8 |  | 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)
10.9 |  | 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)
10.10 |  | 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)

80

10.11 |  | 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)
10.12 |  | 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)
10.13 |  | 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)
10.14 |  | 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)

10.15+ |  | 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)
10.16+ |  | 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)
10.17 |  | 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)
10.18 |  | 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)
10.19* |  | 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)
10.20* |  | Memorandum of Understanding by and between Wize Pharma Ltd. and Resdevco Research and Development Company Ltd., dated January 8, 2018 (Incorporated by reference to Amendment No. 1 to Company’s Annual Report on Form 10-K filed with the SEC on June 5, 2018)
10.21+ |  | 2018 Equity Incentive Plan (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on February 28, 2018)
10.22* |  | Exclusive Distribution Agreement between Wize Pharma Ltd. and HPGC Medical Co., Ltd. dated May 31, 2018 (Incorporated by reference to Company’s Current Report on Form 8-K filed on June 5, 2018)
10.23+ |  | Amendment to 2018 Equity Incentive Plan (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on August 21, 2018)
10.24+ |  | Employment Agreement, dated August 21, 2018, between Wize Pharma Ltd. and Or Eisenberg (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on August 22, 2018)
10.25+ |  | Consulting Services Agreement, dated August 20, 2018, between Wize Pharma Ltd., N. Danenberg Holdings (2000) Ltd. and Noam Danenberg (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on August 22, 2018)
10.26 |  | 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)
10.27 |  | 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)
10.28 |  | 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)

81

10.29 |  | 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)
10.30 |  | 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)
10.31+ |  | 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)
10.32* |  | Memorandum of Understanding between Wize Pharma Ltd. and Resdevco, Research and Development Ltd. dated February 24, 2019 (Incorporated by reference to Company’s Annual Report on Form 10-K filed with the SEC on March 30, 2020)
10.33 |  | Amendment to Convertible Loans Agreements dated March 4, 2019 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on March 4, 2019)
10.34 |  | Amendment to Convertible Loans Agreements dated May 31, 2019 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on June 4, 2019)
10.35 |  | Amendment to Convertible Loans Agreements dated November 29, 2019 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on December 5, 2019)
10.36 |  | Exchange Agreement by and between Bonus BioGroup Ltd. and Wize Pharma Inc., dated January 9, 2020 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 15, 2020)
10.37 |  | Share Purchase Agreement by and between Bonus BioGroup Ltd. and Wize Pharma Inc., dated January 9, 2020 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 15, 2020)
10.38 |  | Form of Registration Rights Agreement (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 15, 2020)
10.39 |  | Series B Purchase Agreement by and between Wize Pharma Inc. and various investors, dated January 9, 2020 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 15, 2020)
10.40# |  | Amendment to Exclusive Distribution and Licensing Agreement by and between Wize Pharma Ltd., OcuWize Ltd. and Resdevco Research and Development Company Ltd., dated May 4, 2020
10.41 |  | Letter Agreement (SPA), dated June 24, 2020, by and between the Company and Bonus BioGroup Ltd. (Incorporated by reference to Company’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2020)
10.42 |  | Amendment to Letter Agreement (SPA), dated July 1, 2020, by and between the Company and Bonus BioGroup Ltd. (Incorporated by reference to Company’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2020)
10.43 |  | Form of Amendment No. 1, dated as of October 28, 2020, to the Securities Purchase Agreement of October 22, 2018, by and among the Company and the investors signatory thereto (Incorporated by reference to Company’s Quarterly Report on Form 10-Q filed with the SEC on November 16, 2020)
10.44 |  | Addendum Agreement, between Wize Pharma, Inc. and Bonus BioGroup Ltd., dated November 29, 2020 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on November 30, 2020)
10.45 |  | Form of Securities Purchase Agreement, between Wize Pharma, Inc. and various Purchasers, dated December 30, 2020 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 5, 2021)
10.46 |  | Form of Securities Purchase Agreement, between Wize Pharma, Inc. and Noam Danenberg, dated December 30, 2020 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 5, 2021)

82

10.47† |  | Deed of Amendment, dated January 18, 2021, of the Bid Implementation Agreement between Wize Pharma, Inc. and Cosmos Capital Limited, dated December 30, 2020 (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 19, 2021)
10.48 |  | Form of Stock Restriction Agreement (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 19, 2021)
10.49† |  | Form of Contingent Value Rights Agreement (Incorporated by reference to Company’s Current Report on Form 8-K filed with the SEC on January 19, 2021)
21.1# |  | Subsidiaries of the Company
23.1# |  | Consent of Independent Registered Public Accounting Firm

31.1# |  | Certification of Chief Executive Officer pursuant to Sec. 302 of the Sarbanes-Oxley Act of 2002
31.2# |  | Certification of Chief Financial Officer pursuant to Sec. 302 of the Sarbanes-Oxley Act of 2002
32.1# |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. SECTION 1350
32.2# |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. SECTION 1350
101# |  | The following materials from Wize, Inc.’s Annual Report on Form 10-K for the year ended December 31, 2020 are formatted in XBRL (eXtensible Business Reporting Language): (i) the Balance Sheets, (ii) the Statements of Comprehensive Loss, (iii) Statement of Changes in Shareholders’ Equity (Deficiency), (iv) the Statements of Cash Flow, and (iv) Notes to Financial Statements.

# | Filed herewith
† | 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.
+ | Management compensatory plan.
* | 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.

ITEM 16. FORM 10-K SUMMARY.

None.

83

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

| Wize Pharma, Inc.
Date: March 1, 2021 | By: | /s/ Or Eisenberg
|  | Or Eisenberg Chief Financial Officer, Treasurer and Secretary (Principal Executive Officer, Principal Financial and Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

NAME |  | TITLE |  | DATE
/s/ Or Eisenberg |  | Chief Financial Officer, Treasurer and Secretary |  | March 1, 2021
Or Eisenberg |  | (Principal Financial and Accounting Officer) |  |
/s/ Noam Danenberg |  | Chief Executive Officer |  | March 1, 2021 |
Noam Danenberg |  |  |  |  |
/s/ Mark Sieczkarek |  | Chairman of the Board |  | March 1, 2021 |
Mark Sieczkarek |  |  |  |  |
/s/ Yossi Keret |  | Director |  | March 1, 2021 |
Yossi Keret |  |  |  |  |
/s/ Joseph Zarzewsky |  | Director |  | March 1, 2021 |
Joseph Zarzewsky |  |  |  |  |
/s/ Michael Belkin |  | Director |  | March 1, 2021 |
Michael Belkin |  |  |  |  |

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