424B3 1 f424b3090717_ophthalixinc.htm PROSPECTUS SUPPLEMENT

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-219514

 

PROXY STATEMENT/PROSPECTUS

 

 

 

To the Stockholders of OphthaliX, Inc.:

 

On May 21, 2017, OphthaliX, Inc., a Delaware corporation (“OphthaliX”), Wize Pharma Ltd., a company formed under the laws of the State of Israel (“Wize”), and Bufiduck Ltd., a company formed under the laws of the State of Israel and a wholly owned subsidiary of OphthaliX (“Merger Sub”), entered into an agreement and plan of merger (as may be amended from time to time, the “Merger Agreement”) that provides for, among other things, the merger of Merger Sub with and into Wize, with Wize continuing as the surviving entity and becoming a wholly owned subsidiary of OphthaliX, on the terms and conditions set forth in the Merger Agreement (the “Merger”). The boards of directors of each of OphthaliX and Wize have each approved the Merger Agreement and the transactions contemplated by the Merger Agreement, including the Merger.

 

If the Merger is completed, holders of outstanding Wize ordinary shares (collectively referred to herein as the Wize shareholders) will be entitled to receive 4.1781 shares of OphthaliX common stock for each one Wize ordinary share they hold, or an aggregate of 93,971,259 shares of OphthaliX common stock at closing, subject to adjustment as set forth in the Merger Agreement. Immediately following the effective time of the Merger (the “Effective Time”), pre-merger Wize shareholders are expected to own approximately 90% of the outstanding common stock of OphthaliX on a fully diluted basis (excluding (i) shares of OphthaliX common stock issuable upon exercise of convertible loans of Wize that will, at the Effective Time, become convertible into shares of OphthaliX common stock, and (ii) shares of OphthaliX common stock issuable upon exercise of future investment rights held by holders of such convertible loans that will, at the Effective Time, become exercisable into shares of OphthaliX common stock) while pre-merger OphthaliX stockholders are expected to own the remaining approximate 10%. At the Effective Time, pre-merger OphthaliX stockholders will continue to own and hold their existing shares of OphthaliX common stock.

 

OphthaliX common stock is currently quoted on the OTC Pink and trades under the symbol “OPLI.” In connection with and immediately prior to the Merger, OphthaliX will change its name to “Wize Pharma, Inc.” in accordance with Delaware law. On May 19, 2017, the last full trading day before the announcement of the Merger, the last reported sale price of OphthaliX common stock was $0.31 per share, and, on September 7, 2017, the latest practicable date prior to the date of this proxy statement/prospectus, the last reported sale price of OphthaliX common stock was $0.11 per share. OphthaliX urges you to obtain current market quotations for the price of OphthaliX common stock.

 

Wize ordinary shares are currently listed on the Tel Aviv Stock Exchange and trade under the symbol “WIZP.” Upon completion of the Merger, Wize ordinary shares will be delisted from the Tel Aviv Stock Exchange and there will no longer be a public trading market for Wize ordinary shares. On May 18, 2017, the last full trading day before the announcement of the Merger, the last reported sale price of Wize ordinary shares was NIS 1.67, or $0.47 per share (based on the exchange rate reported by the Bank of Israel on such date), and, on September 7, 2017, the latest practicable date prior to the date of this proxy statement/prospectus, the last reported sale price of Wize ordinary shares was NIS 2.15, or $0.61 per share (based on the exchange rate reported by the Bank of Israel on such date). OphthaliX urges you to obtain current market quotations for the price of Wize’s ordinary shares.

 

 

 

OphthaliX will hold an annual meeting of its stockholders, at which meeting OphthaliX stockholders will be asked to consider and vote upon the following proposals: (i) to approve an amendment to the Certificate of Incorporation of OphthaliX (as amended by that certain Certificate of Amendment, dated July 18, 2013, the “OphthaliX Certificate of Incorporation”) to increase the number of authorized shares of Ophthalix’s common stock from 100,000,000 to 500,000,000 (the “Authorized Share Increase Proposal”), (ii) to approve an amendment to the OphthaliX Certificate of Incorporation to change OphthaliX’s name to “Wize Pharma, Inc.” immediately prior to the Merger (the “Name Change Proposal”), (iii) to elect as directors the nominees named in this proxy statement/prospectus for a term of office expiring at the next annual meeting of stockholders and until their respective successors are duly elected and qualified; provided, however, that, if the Merger is completed, the board of directors of OphthaliX will be reconstituted as described in this proxy statement/prospectus (the “Election of Directors Proposal”), (iv) to hold a non-binding advisory vote on named executive officer compensation of OphthaliX (the “Say on Pay Proposal”), (v) to hold a non-binding advisory vote on the frequency of future advisory votes on named executive officer compensation of OphthaliX (once every year, every two years or three years) (the “Say on Frequency Proposal”), (vi) to ratify the appointment of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, as OphthaliX’s independent registered public accounting firm for the fiscal year ending December 31, 2017 (the “Auditor Ratification Proposal”), and (vii) to adjourn the annual meeting, if necessary, to permit the solicitation of additional proxies in the event that there are insufficient votes on one or more of the proposals presented to OphthaliX stockholders (the “Adjournment Proposal”).

 

The OphthaliX annual meeting will be held on October 10, 2017 at 4.00 p.m., local time, at 10 Bareket Street, Petach Tikva, Israel.

 

Completion of the Merger is conditioned upon the satisfaction or waiver, as applicable, of all closing conditions under the Merger Agreement, including, among other things, (i) the adoption and approval at the OphthaliX meeting of the Authorized Share Increase Proposal, the Name Change Proposal, and the Election of Directors Proposal, (ii) the approval by the shareholders of Wize of the arrangement among Wize and its shareholders under Sections 350 and 351 of the Israeli Companies Law, 1999, as amended (the “Arrangement”), (iii) the approval of the Arrangement by the Israeli District Court of Lod, (iv) as of the earlier of the Effective Time or August 30, 2017, Wize shall have available cash and cash equivalents of at least NIS 1,000,000 (approximately $280,000), (v) OphthaliX not having any liabilities as of the Effective Time, (vi) the Israel Security Authority shall have granted an exemption, or an exemption is available, from the need to publish an Israeli prospectus in connection with the Merger, (vii) the Israeli Tax Authority’s grant of a pre-ruling reasonably satisfactory to Wize regarding the tax treatment of the transactions contemplated by the Merger Agreement, and (viii) the effectiveness of the registration statement of which this prospectus forms a part.

 

OphthaliX’s board of directors has determined that it is advisable and in the best interest of OphthaliX and its stockholders to enter into the Merger Agreement and the board has authorized and approved the terms of the Merger Agreement and the transactions contemplated thereby, has unanimously approved the Merger Agreement and unanimously recommends that OphthaliX stockholders vote, “FOR” the Authorized Share Increase Proposal, “FOR” the Name Change Proposal, “FOR” each of the directors named in the Election of Directors Proposal, “FOR” the Say on Pay Proposal, “FOR” the one year alternative with respect to the Say on Frequency Proposal, “FOR” the Auditor Ratification Proposal and “FOR” the Adjournment Proposal.

 

This proxy statement/prospectus provides you with important information about the annual meeting, OphthaliX, Wize, the proposed Merger and the other transactions and documents related to the Merger. Please carefully read this entire proxy statement/prospectus, including “RISK FACTORS” beginning on page 13.

 

Your vote is very important. Whether or not you plan to attend the annual meeting of OphthaliX, please take the time to vote by completing and returning the enclosed proxy card to OphthaliX. If your shares are held in “street name,” you must instruct your broker in order to vote on all proposals.

 

  Sincerely,
   
  Pnina Fishman, Ph.D.
  Chief Executive Officer

 

Neither the Securities and Exchange Commission nor any state securities commission, nor the Israel Securities Authority has approved or disapproved of the OphthaliX common stock to be issued in the Merger, or determined if this proxy statement/prospectus is accurate or complete. Any representation to the contrary is a criminal offense.

 

This proxy statement/prospectus is dated September 8, 2017, and is first being mailed to OphthaliX and Wize stockholders on or about September 11, 2017.

 

 

 

 

OPHTHALIX, INC.

10 Bareket Street

Petach Tikva, Israel, 4951778

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

 

TO BE HELD ON OCTOBER 10, 2017

 

To the Stockholders of OphthaliX, Inc.:

 

NOTICE IS HEREBY GIVEN that an annual meeting of the stockholders (the “OphthaliX annual meeting”) of OphthaliX, Inc., a Delaware corporation (“OphthaliX,” “we,” “our,” or “us”), will be held on October 10, 2017, at 4.00 p.m., local time at 10 Bareket Street, Petach Tikva, Israel to consider and vote upon the following matters:

 

(1)        The Authorized Share Increase Proposal — to approve an amendment to the Certificate of Incorporation of OphthaliX (as amended by that certain Certificate of Amendment, dated July 18, 2013, the “OphthaliX Certificate of Incorporation”) to increase the number of authorized shares of OphthaliX’s shares of common stock from 100,000,000 to 500,000,000 (the “Authorized Share Increase Proposal”);

 

(2)        The Name Change Proposal — to approve an amendment to the OphthaliX Certificate of Incorporation to change OphthaliX’s name to “Wize Pharma, Inc.” immediately prior to the Merger (the “Name Change Proposal”);

 

(3)        The Election of Directors Proposal — to re-elect Pnina Fishman, Ilan Cohn, Guy Regev, Roger Kornberg and Michael Belkin for a term of office expiring at the next annual meeting of stockholders and until their respective successors are duly elected and qualified; provided, however, that, if the Merger is completed, the board of directors of OphthaliX will be reconstituted as described in this proxy statement/prospectus (the “Election of Directors Proposal”);

 

(4)       The Say on Pay Proposal— to approve by a non-binding advisory vote on named executive officer compensation of OphthaliX as described in this proxy statement/prospectus (the “Say on Pay Proposal”);

 

(5)       The Say on Frequency Proposal — to hold a non-binding advisory vote on the frequency of future advisory votes on named executive officer compensation of OphthaliX (once every year, every two years or three years) (the “Say on Frequency Proposal”);

 

(6)       The Auditor Ratification Proposal — to ratify the appointment of Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global, as OphthaliX’s independent registered public accounting firm for the fiscal year ending December 31, 2017 (the “Auditor Ratification Proposal”);

 

(7)        The Adjournment Proposal — to consider and vote upon a proposal to adjourn the annual meeting to a later date or dates, if necessary, to permit the solicitation of additional proxies if, based upon the tabulated vote at the time of the annual meeting, there are not sufficient votes to approve one or more proposals presented to stockholders for vote (the “Adjournment Proposal”); and

 

(8)       To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.

 

Our board of directors has fixed the close of business on September 5, 2017 as the record date for the annual meeting. Only holders of record of shares of OphthaliX common stock at the close of business on such date are entitled to receive notice of, and vote at, the annual meeting or at any postponement(s) or adjournment(s) of the annual meeting. A complete list of our stockholders of record entitled to vote at the annual meeting will be available for ten (10) days before the annual meeting at our principal executive office for inspection by stockholders during ordinary business hours for any purpose germane to the annual meeting.

 

 

 

OPHTHALIX’S BOARD OF DIRECTORS RECOMMENDS THAT OPHTHALIX STOCKHOLDERS VOTE “FOR” THE AUTHORIZED SHARE INCREASE PROPOSAL, “FOR” THE NAME CHANGE PROPOSAL, “FOR” EACH OF THE DIRECTORS NAMED IN THE ELECTION OF DIRECTORS PROPOSAL, “FOR” THE SAY ON PAY PROPOSAL, “FOR” THE ONE YEAR ALTERNATIVE WITH RESPECT TO THE SAY ON FREQUENCY PROPOSAL, “FOR” THE AUDITOR RATIFICATION PROPOSAL AND “FOR” THE ADJOURNMENT PROPOSAL.

 

Your vote is very important. If your shares are registered in your name as a stockholder of record of OphthaliX, whether or not you expect to attend the annual meeting, please sign and return the enclosed proxy card promptly in the envelope provided, to ensure that your shares will be represented at the annual meeting.

 

If your shares are held in “street name” through a broker, trust, bank or other nominee, and you received the notice of the annual meeting through your broker or through another intermediary, please complete and return the materials in accordance with the instructions provided to you by such broker or other intermediary to instruct them how to vote your shares or contact your broker or other intermediary directly in order to obtain a proxy issued to you by your nominee holder to attend the annual meeting and vote in person. Failure to do so may result in your shares not being eligible to be voted by proxy at the annual meeting.

 

You may revoke a proxy at any time prior to its exercise at the meeting by following the instructions in the enclosed proxy statement/prospectus.

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON OCTOBER 10, 2017: This notice is not a form for voting and presents only an overview of the more complete proxy statement/prospectus. We urge you to read the accompanying proxy statement/prospectus, including its annexes and the section entitled “RISK FACTORS” beginning on page 13, carefully and in their entirety. Copies of the proxy statement/prospectus and the accompanying proxy card are available, without charge on the internet at www.ophthalix.com, and can be obtained by calling (972) 3 924 1114 or sending an e-mail to info@ophthalix.com. To obtain timely delivery, our stockholders must request the materials no later than five (5) business days prior to the OphthaliX annual meeting. If you have any questions concerning the proposals, the OphthaliX annual meeting or the accompanying proxy statement/prospectus or need help voting your shares of OphthaliX common stock, please contact Motti Farbstein at (972) 3 924 1114.

 

  By Order of the Board of Directors,
   
  /s/ Pnina Fishman
  Pnina Fishman
  Chairman and Chief Executive Officer

 

September 8, 2017

 

 

 

REFERENCE TO ADDITIONAL INFORMATION

 

This proxy statement/prospectus incorporates by reference important business and financial information about OphthaliX that is not included in or delivered with this document. Additional information about OphthaliX is available to you without charge upon your request. You can obtain any of the documents filed with or furnished to the Securities and Exchange Commission, or the “SEC,” by OphthaliX at no cost from the SEC’s website at http://www.sec.gov. You may also request copies of these documents at no cost by requesting them in writing or by telephone at the following address and telephone number:

 

OphthaliX, Inc.:

 

10 Bareket Street

Petach Tikva, Israel, 4951778

Attention: Corporate Secretary

Telephone: (972) 3 924 1114

 

To obtain timely delivery of these documents, you must request them no later than five (5) business days before the date of the OphthaliX annual meeting. This means that OphthaliX stockholders requesting documents must do so by October 3, 2017.

 

You should rely only on the information contained in this document. No one has been authorized to provide you with information that is different from that contained in this document. This document is dated September 8, 2017, and you should assume that the information in this document is accurate only as of such date. Neither the mailing nor delivery of this document to OphthaliX stockholders or Wize shareholders nor the issuance by OphthaliX of shares of OphthaliX common stock in connection with the Merger will create any implication to the contrary.

 

ABOUT THIS PROXY STATEMENT/PROSPECTUS

 

This proxy statement/prospectus, which forms a part of a registration statement on Form S-4 filed with the SEC by OphthaliX (File No. 333-219514), constitutes a prospectus of OphthaliX under Section 5 of the Securities Act of 1933, as amended (the “Securities Act”), with respect to the shares of OphthaliX common stock to be issued to the Wize security holders in connection with the Merger.

 

This proxy statement/prospectus also constitutes a notice of meeting and a proxy statement under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) with respect to an OphthaliX annual meeting of shareholders, at which OphthaliX shareholders will be asked to consider and vote upon certain proposals as further described herein.

 

You should rely only on the information contained in this proxy statement/prospectus to vote your shares at the OphthaliX annual meeting. Neither OphthaliX nor Wize has authorized anyone to give any information or make any representation about the Merger, OphthaliX or Wize that is different from, or in addition to, the information or representations contained in this proxy statement/prospectus. Therefore, if anyone does give you information or representations of this sort, you should not rely on it or them. The information contained in this proxy statement/prospectus speaks only as of the date of this document unless the information specifically indicates that another date applies.

 

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction to or from any person to whom it is unlawful to make any such offer or solicitation. Information contained in this proxy statement/prospectus regarding OphthaliX or its affiliates has been provided by OphthaliX and information contained in this proxy statement/​prospectus regarding Wize or its affiliates has been provided by Wize.

 

Unless derived from Wize’s financial statements or otherwise indicated, U.S. dollar translations of NIS amounts presented in this proxy statement/prospectus are translated using the rate of NIS 3.496 to one U.S. dollar, the exchange rate reported by the Bank of Israel for June 30, 2017.

 

Statements made in this proxy statement/prospectus 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 OphthaliX filed any of these documents as an exhibit to the registration statement of which this proxy statement/prospectus forms part or to any registration statement or annual or quarterly report that OphthaliX 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 proxy statement/prospectus.

 

Unless otherwise indicated, information contained in this proxy statement/prospectus concerning Wize’s industry and the markets in which Wize operates, including competitive position and market opportunity, is based on information from Wize’s own management estimates and research, as well as from industry and general publications and research, surveys and studies conducted by third parties. Such management estimates are derived from publicly available information, OphthaliX’s or Wize’s knowledge of the relevant industry and assumptions based on such information and knowledge, which OphthaliX and Wize believe to be reasonable. Wize’s management estimates have not been verified by any independent source, and neither OphthaliX nor Wize have independently verified any third-party information. In addition, assumptions and estimates of industry’s future performance are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described under “RISK FACTORS” below.

 

 

 

TABLE OF CONTENTS

 

    Page
QUESTIONS AND ANSWERS ABOUT THE MERGER   QA-1
SUMMARY   1
SELECTED HISTORICAL FINANCIAL INFORMATION OF OPHTHALIX   8
SELECTED HISTORICAL FINANCIAL INFORMATION OF WIZE   9
SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA   10
COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA   11
MARKET PRICE AND DIVIDEND INFORMATION   11
COMPARATIVE MARKET PRICE INFORMATION   12
RISK FACTORS   13
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS   40
THE COMPANIES   41
THE ANNUAL MEETING OF OPHTHALIX STOCKHOLDERS   43
General   43
Date, Time and Place   43
Purpose of the OphthaliX Annual Meeting   43
Recommendation of the OphthaliX Board of Directors   43
OphthaliX Record Date and Quorum   43
Vote Required for Approval   44
Withholding Your Vote, Abstentions and Broker Non-Votes   44
Manner of Submitting Proxy   45
Shares Held in Street Name   45
Revocation of Proxies and Voting Instructions   45
Tabulation of Votes   46
Soliciation of Proxies   46
Other Business   46
PROPOSALS SUBMITTED TO OPHTHALIX STOCKHOLDERS   47
Proposal 1 –Authorized Share Increase Proposal   47
Proposal 2 –Name Change Proposal   48
Proposal 3 –Election of Directors Proposal   49
Proposal 4 – Say on Pay Proposal   55
Proposal 5 – Say on Frequency Proposal   56
Proposal 6 – Auditor Ratification Proposal   57
Proposal 7 – Adjournment Proposal   58
THE MERGER   59
General   59
Background of the Merger   59
OphthaliX’s Reasons for the Merger   62
Wize’s Reasons for the Merger   64
Opinion of Wize’s Financial Advisor   66
Listing of OphthaliX Common Stock; Delisting of Wize Ordinary Shares   68
Ownership of OphthaliX Following the Merger   68
Board Composition and Management of OphthaliX Following the Merger   68
Interests of OphthaliX’s Directors and Executive Officers in the Merger   69
Regulatory Approvals Required for the Merger   71
Accounting Treatment   72
Restrictions on Sales of Shares by Affiliates   72
U.S. Federal Income Tax Considerations   73
Material Israeli Tax Considerations   73
Appraisal Rights   73

 

 

 

THE MERGER AGREEMENT   73
Form, Effective Time and Closing of Merger 74
Effects of Merger; Merger Consideration   74
Fractional Shares   75
Treatment of Wize Convertible Debt   75
Exchange of Wize Certificates; Withholding Taxes   75
Representations and Warranties   76
Covenants and Agreements   77
Conditions to Completion of the Merger   81
Termination of the Merger Agreement   82
Effect of Termination   83
Miscellaneous Provisions   83
AGREEMENTS RELATING TO THE MERGER   84
Voting and Undertaking Agreement   84
Agreements Related to the Sale of Eyefite to Can-Fite   84
INFORMATION ABOUT OPHTHALIX   85
INFORMATION ABOUT WIZE   91
MANAGEMENT OF OPHTHALIX FOLLOWING THE MERGER   120
RELATED PARTY TRANSACTIONS   126
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS   129
PRINCIPAL STOCKHOLDERS OF OPHTHALIX   135
PRINCIPAL SHAREHOLDERS OF WIZE   136
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER   138
CERTAIN MATERIAL ISRAELI TAX CONSEQUENCES OF THE MERGER   142
DESCRIPTION OF OPHTHALIX CAPITAL STOCK   144
COMPARISON OF RIGHTS OF HOLDERS OF OPHTHALIX SHARES AND WIZE SHARES   146
LEGAL MATTERS   160
EXPERTS   160
WHERE YOU CAN FIND MORE INFORMATION   160
ACCOMPANYING INFORMATION   160
STOCKHOLDER PROPOSALS   161
HOUSEHOLDING OF PROXY MATERIALS   161
OTHER MATTERS   161
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF OPHTHALIX INC. AND SUBSIDIARY   F-1
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF WIZE PHARMA LTD AND SUBSIDIARY   F-35
Agreement and Plan of Merger   ANNEX A
Voting and Undertaking Agreement   ANNEX B
Opinion of Pulvernis, Bareket, Ben-Yehuda Ltd.   ANNEX C
Form of Amendment to OphthaliX Certificate of Incorporation (Name Change and Increase of Authorized Capital)   ANNEX D

 

 

 

QUESTIONS AND ANSWERS

 

The following are answers to some questions that OphthaliX stockholders may have regarding the proposed merger and the other proposals being considered by OphthaliX stockholders. OphthaliX urges you to carefully read this entire proxy statement/prospectus, including the annexes, because the information in this section does not provide all the information that might be important to you.

 

Unless the context otherwise requires, references in this proxy statement/prospectus to “OphthaliX” refers to OphthaliX, Inc., a Delaware corporation; “Merger Sub” refers to Bufiduck Ltd., a company formed under the laws of the State of Israel and a wholly owned subsidiary of OphthaliX, and “Wize” refers to Wize Pharma Ltd., a company formed under the laws of the State of Israel.

 

Q: Why am I receiving this proxy statement/prospectus?

 

A:         You are receiving this proxy statement/prospectus because OphthaliX, Merger Sub and Wize have signed an Agreement and Plan of Merger, dated as of May 21, 2017 (as may be amended from time to time, the “Merger Agreement”), which is described in more detail in this proxy statement/prospectus starting at page 73. In connection with the Merger, the stockholders of OphthaliX are being asked to vote upon certain proposals as further described herein.

 

This proxy statement/prospectus contains important information about the Merger and the proposals being voted on by OphthaliX stockholders, and you should read it carefully. This document collectively serves as a proxy statement of OphthaliX and a prospectus of OphthaliX. It is a proxy statement because the OphthaliX board of directors is soliciting proxies from its stockholders. It is a prospectus because OphthaliX will issue shares of OphthaliX common stock to Wize shareholders in connection with the Merger. Your vote is important. You are encouraged to submit your proxy as soon as possible after carefully reviewing this proxy/prospectus and its annexes.

 

Q:          What will happen in the Merger?

 

A:         OphthaliX, Merger Sub and Wize entered into the Merger Agreement on May 21, 2017. The Merger Agreement sets forth the terms and conditions of the proposed business combination of OphthaliX and Wize. Under the Merger Agreement, Wize will merge with and into Merger Sub, with Wize continuing as the surviving entity and a wholly owned subsidiary of OphthaliX (the “Merger”).

  

A complete copy of the Merger Agreement is attached to this proxy statement/prospectus as Annex A. For a more complete discussion of the proposed Merger, its effects and the other transactions contemplated by the Merger Agreement, see “THE MERGER” beginning on page 59 of this proxy statement/prospectus.

  

Q:          What equity stake will current OphthaliX stockholders and former Wize shareholders hold in OphthaliX after the closing of the Merger?

 

A:         It is anticipated that, immediately after the closing of the Merger, current OphthaliX stockholders will own approximately 10%, and former equity holders of Wize will own approximately 90%, of the issued and outstanding shares of common stock of OphthaliX.

 

Q:          How will the Merger affect OphthaliX’s business?

 

A:          OphthaliX has no active business operations and is deemed to be a “shell company” as defined in Rule 12b-2 of the Exchange Act. Upon completion of the Merger, the business of Wize shall become the business of OphthaliX and OphthaliX is expected to cease to be a “shell company”.

 

Additional information about Wize can be found in the sections entitled “INFORMATION ABOUT WIZE — Wize Business Description” beginning on page 91, “INFORMATION ABOUT WIZE — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 and Wize’s financial statements included elsewhere in this proxy statement/prospectus.

 

 QA-1 

 

Q:         When do OphthaliX and Wize expect to complete the Merger?

 

A:         OphthaliX and Wize anticipate that the Merger will be consummated promptly following (i) the adoption and approval at the OphthaliX meeting of the Authorized Share Increase Proposal, the Name Change Proposal, the Election of Directors Proposal and the Adjournment Proposal, (ii) the approval by the shareholders of Wize of the arrangement (the “Arrangement”) among Wize and its shareholders under Sections 350 and 351 of the Israeli Companies Law, 1999, as amended (the “Israeli Companies Law”), (iii) the approval of the Arrangement by the Israeli District Court of Lod, (iv) as of the earlier of the Effective Time or August 30, 2017, Wize shall have available cash and cash equivalents of at least NIS 1,000,000 (approximately $280,000), (iv) the approval of the Arrangement by the Israeli District Court of Lod, (v) OphthaliX not having any liabilities as of the Effective Time, (vi) the Israel Securities Authority (the “ISA”) shall have granted an exemption, or an exemption is available, from the need to publish an Israeli prospectus in connection with the Merger, (vii) the Israeli Tax Authority’s grant of a pre-ruling (the “104(h) Tax Ruling”) in accordance with Section 104(h) of the Israeli Income Tax Ordinance [New Version] 5721-1961, as amended, and the rules and regulation promulgated thereunder (the “Israeli Tax Ordinance”) reasonably satisfactory to Wize regarding the tax treatment of the transactions contemplated by the Merger Agreement, and (viii) the effectiveness of the registration statement of which this prospectus forms a part. However, it is possible that the failure to timely meet the closing conditions specified in the Merger Agreement or other factors outside of OphthaliX’s or Wize’s control could require OphthaliX and Wize to complete the Merger at a later time or not at all. See “THE MERGER AGREEMENT — Conditions to Completion of the Merger” beginning on page 81 of this proxy statement/prospectus for a more complete summary of the conditions that must be satisfied prior to closing.

 

Q:          What do I need to do now?

 

A: After you have carefully read this proxy statement/prospectus and have decided how you wish to vote your shares, please authorize a proxy to vote your shares promptly so that your shares are represented and voted at the OphthaliX annual meeting.

 

Q:         What will I receive in the Merger?

 

A:         If the Merger is completed, OphthaliX stockholders will not receive any merger consideration and will continue to hold the shares of OphthaliX common stock that they currently hold.

 

OphthaliX common stock is currently quoted on the OTC Pink and trades under the symbol “OPLI.” In connection with and immediately prior to the Merger, OphthaliX will change its name to “Wize Pharma, Inc.” in accordance with Delaware law. OphthaliX stockholders will experience dilution as a result of the issuance of OphthaliX common stock to the Wize shareholders in connection with the Merger.

 

Q:         Who can help answer my questions?

 

A:        The information provided above in this “Question and Answer” format is for your convenience only and is merely a summary of the information contained in this proxy statement/prospectus. OphthaliX urges you to carefully read this entire proxy statement/prospectus, including the documents referred to herein or otherwise incorporated by reference. If you have any questions, or need additional material, please feel free to contact:

 

OphthaliX, Inc.:

 

10 Bareket Street

Petach Tikva, Israel, 4951778

Attention: Corporate Secretary

Telephone: (972) 3 924 1114

 

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SUMMARY

 

This summary highlights selected information from this proxy statement/prospectus and may not contain all of the information that is important to you. You are urged to carefully read this entire document, including the annexes, and the other documents to which OphthaliX refer for a more complete understanding of the Merger. In addition, OphthaliX encourages you to read the information about OphthaliX in the section entitled “INFORMATION ABOUT OPHTHALIX” beginning on page 85 of this proxy statement/prospectus, which includes important business and financial information about OphthaliX, and to read the information in the section entitled “INFORMATION ABOUT WIZE” beginning on page 91 of this proxy statement/prospectus, which includes important business and financial information about Wize. Stockholders of OphthaliX may obtain additional information about OphthaliX without charge by following the instructions in the section entitled “WHERE YOU CAN FIND MORE INFORMATION” beginning on page 160 of this proxy statement/prospectus. Each item in this summary refers to the page of this proxy statement/prospectus on which that subject is discussed in more detail.

 

This summary and the balance of this document contain forward-looking statements about events that are not certain to occur, and you should not place undue reliance on those statements. Please carefully read “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS” on page 40 of this proxy statement/prospectus.

 

The Companies (Page 41)

 

OphthaliX

 

OphthaliX, Inc.

10 Bareket Street

Petach Tikva,

Israel, 4951778

Tel: +972 3 924 1114

 

OphthaliX was a clinical-stage biopharmaceutical company focused on developing therapeutic products for the treatment of ophthalmic disorders. OphthaliX has in-licensed certain patents and patent applications protecting the use in the ophthalmic field of OphthaliX’s current pipeline drug under development, a synthetic A3 adenosine receptor, or A3AR, agonist, CF101 (known generically as IB-MECA).

 

OphthaliX has no active business operations and is deemed to be a “shell company” as defined in Rule 12b-2 of the Exchange Act.

 

OphthaliX common stock is currently quoted on OTC Pink and trades under the symbol “OPLI.”

 

Additional information about OphthaliX can be found in the sections titled “INFORMATION ABOUT OPHTHALIX — OphthaliX Business Description” beginning on page 85, “INFORMATION ABOUT OPHTHALIX —Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 87 and OphthaliX’s financial statements included elsewhere in this proxy statement/prospectus.

 

OphthaliX’s principal website is www.ophthalix.com. This website is an inactive textual reference only and not an active hyperlink. The information on or that can be accessed through OphthaliX’s website is specifically not incorporated by reference into this proxy statement/prospectus, and is not a part of this proxy statement/prospectus.

 

Merger Sub

 

Bufiduck Ltd.

10 Bareket Street

Petach Tikva,

Israel, 4951778

Tel: +972 3 924 1114

 

Bufiduck Ltd., a company formed under the laws of the State of Israel, is a wholly owned subsidiary of OphthaliX, which was recently formed solely for the purpose of entering into the Merger Agreement and consummating the Merger and the other transactions contemplated by the Merger Agreement. It is not engaged in any business and has no material assets. In the Merger, Merger Sub will merge with and into Wize, with Wize surviving the Merger as OphthaliX’s wholly owned subsidiary, and Merger Sub will cease to exist.

 

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Wize

 

Wize Pharma Ltd.

5b Hanagar Street

Hod Hasharon,

Israel, 4527708

Tel: +972 72 260 0536

 

Wize is a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including dry eye syndrome (“DES”). Wize has 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”).

 

Wize ordinary shares are currently listed on the Tel Aviv Stock Exchange (“TASE”) and trade under the symbol “WIZP.”

 

Additional information about Wize can be found in the sections entitled “INFORMATION ABOUT WIZE — Wize Business Description” beginning on page 91, “INFORMATION ABOUT WIZE — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 and Wize’s financial statements included elsewhere in this proxy statement/prospectus.

 

The Merger (Page 59)

 

The Merger Agreement (Page 73)

 

On May 21, 2017, OphthaliX, Merger Sub and Wize entered into the Merger Agreement. The Merger Agreement is the legal document governing the Merger and is included in this proxy statement/prospectus as Annex A. All descriptions in this Summary and elsewhere in this proxy statement/prospectus of the terms and conditions of the Merger are qualified in their entirety by reference to the full text of the Merger Agreement. Please read the Merger Agreement carefully for a more complete understanding of the Merger.

 

The Merger (Page 74)

 

At the Effective Time of the Merger, Merger Sub, a wholly owned subsidiary of OphthaliX, will merge with and into Wize. Upon completion of the Merger, the separate corporate existence of Merger Sub will cease, and Wize will continue as the surviving entity and as a wholly owned subsidiary of OphthaliX. Immediately prior to the Merger, OphthaliX will change its name to “Wize Pharma, Inc.”

 

Effects of Merger (Page 74)

 

At the Effective Time of the Merger, each ordinary share of Wize that is issued and outstanding will be automatically cancelled and converted into the right to receive that number of validly issued, fully paid and non-assessable shares of OphthaliX common stock equal to an exchange ratio of 4.1781 shares of OphthaliX common stock for each one Wize ordinary share, subject to adjustment as set forth in the Merger Agreement.

 

Treatment of Wize Convertible Debt (Page 75)

 

Each convertible note or loan to purchase Wize ordinary shares existing at the time of the Merger Agreement (the “Convertible Loans”) will constitute a convertible note to purchase the number of shares of OphthaliX common stock equal to the number of Wize ordinary shares that were subject to a convertible note or loan immediately prior to the Effective Time multiplied by the exchange ratio at a proportionally adjusted conversion price. In this respect, it was further agreed that the conversion of all or part of such Convertible Loans (including future investment rights to the holders thereof upon such conversion (the “Future Investment Rights”) and the shares issuable upon exercise of the Future Investment Rights) whether before or after the Effective Time, shall not modify the exchange ratio. For additional information about the Convertible Loans, see under “INFORMATION ABOUT WIZE — Management’s Discussion and Analysis of Financial Condition and Results of Operations” on page 113 of this proxy statement/prospectus.

 

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Risk Factors (Page 13)

 

In evaluating the Merger Agreement and the Merger and related transactions contemplated by the Merger Agreement, you should carefully consider all of the information into this proxy statement/prospectus. In particular, you are urged to read and consider all of the factors discussed in the section entitled “RISK FACTORS” beginning on page 13 of this proxy statement/prospectus.

 

Recommendation of the OphthaliX’s Board of Directors (Page 43)

 

OphthaliX’s board of directors has determined that the Merger Agreement and the transactions contemplated thereby, including the Merger and the issuance of shares of OphthaliX common stock pursuant to the terms of the Merger Agreement, are just, equitable and fair to OphthaliX and its shareholders and that it is in the best interests of OphthaliX and its shareholders that OphthaliX complete the Merger and has unanimously adopted and approved the Merger Agreement and the transactions contemplated thereby, including the Merger and the other transactions contemplated thereby. OphthaliX’s board of directors unanimously recommends that OphthaliX stockholders vote “FOR” the Authorized Share Increase Proposal, “FOR” the Name Change Proposal, “FOR” each of the directors named in the Election of Directors Proposal, “FOR” the Say on Pay Proposal, “FOR” the one year alternative with respect to the Say on Frequency Proposal, “FOR” the Auditor Ratification Proposal and “FOR” the Adjournment Proposal. For the factors considered by OphthaliX’s board of directors in reaching its decision to approve the Merger and Merger Agreement, see the section entitled “THE MERGER — OphthaliX’s Reasons for the Merger” beginning on page 62 of this proxy statement/prospectus.

 

The OphthaliX Annual Meeting (Page 43)

 

The OphthaliX annual meeting will be held on October 10, 2017, at 4.00 p.m., local time, at 10 Bareket Street, Petach Tikva, Israel. At the annual meeting, OphthaliX stockholders will be asked to consider and vote on the following:

 

  (1) The Authorized Share Increase Proposal;

 

  (2) The Name Change Proposal;

 

  (3) The Election of Directors Proposal;

 

  (4) The Say on Pay Proposal;

 

  (5) The Say on Frequency Proposal;

 

  (6) The Auditor Ratification Proposal;

 

  (7) The Adjournment Proposal.

 

(8)To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.

 

Only the holders of record of shares of OphthaliX common stock at the close of business on September 5, 2017, the OphthaliX record date, will be entitled to vote at the annual meeting. Each share of OphthaliX common stock is entitled to one vote on each proposal to be considered at the OphthaliX annual meeting. As of the OphthaliX record date, there were 10,441,251 shares of OphthaliX common stock outstanding entitled to vote at the OphthaliX annual meeting.

 

Pursuant to the OphthaliX bylaws, the presence at the annual meeting of the holders of at least 33⅓% of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, outstanding on the record date will constitute a quorum. Stockholders present in person or by proxy (including stockholders who abstain or do not vote with respect to one or more of the matters presented for stockholder approval) will be counted for purposes of determining whether a quorum is present.

 

As of the close of business on the OphthaliX record date, the directors and executive officers of OphthaliX as well as Can-Fite Biopharma Ltd. (“Can-Fite”), OphthaliX’s parent and holder, collectively beneficially own and are entitled to vote 8,629,752 shares of OphthaliX common stock, which represent, in the aggregate, approximately 82.6% of OphthaliX common stock outstanding on that date. OphthaliX currently expects that the directors and executive officers of OphthaliX as well as Can-Fite will vote their shares in favor of the Authorized Share Increase Proposal, the Name Change Proposal, each of the directors named in the Election of Directors Proposal, the Say on Pay Proposal, the one year alternative with respect to the Say on Frequency Proposal, the Auditor Ratification Proposal and the Adjournment Proposal.

 

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Approval of the Authorized Share Increase Proposal, the Name Change Proposal, the Say on Pay Proposal and the Adjournment Proposal requires the affirmative vote of holders of at least a majority of the votes cast at the annual meeting. Approval of the Election of Directors Proposal requires the affirmative vote of a plurality of the votes for each of the five director nominees. For the Say on Frequency Proposal, the option of every one year, two years, or three years that receives the highest number of affirmative votes cast will be the frequency deemed recommended by stockholders. Each of the Authorized Share Increase Proposal, Name Change Proposal and Election of Directors Proposal are conditioned upon each other.

 

In the Election of Directors Proposal, you can withhold your vote for any or all of the nominees. Withheld votes will be excluded entirely from the vote and will have no effect on the outcome. With regard to all other proposals, you can vote to “abstain.” If you vote to “abstain,” your shares will be counted as present at the meeting for purposes of determining whether a quorum exists, but such abstention will have no effect on the proposal. A broker non-vote is considered present at the meeting for purposes of determining whether a quorum exists but is not counted as a vote cast on any non-routine matter presented at the annual meeting.

 

Interests of OphthaliX’s Directors and Executive Officers in the Merger (Page 69)

 

In considering the recommendation of the OphthaliX board of directors of directors that OphthaliX stockholders vote to approve all of the presented proposals, OphthaliX stockholders should be aware that some of OphthaliX’s directors and officers have interests in the Merger and have arrangements that are different from, or in addition to, those of OphthaliX stockholders generally. These interests and arrangements may create potential conflicts of interest. OphthaliX’s board of directors was aware of these interests and considered these interests, among other matters, in adopting and approving the Merger Agreement and the transactions contemplated thereby, including the Merger.

 

When OphthaliX’s stockholders consider the recommendation of OphthaliX’s board of directors in favor of approval of the Authorized Share Increase Proposal, the Name Change Proposal, the Election of Directors Proposal and the Adjournment Proposal, OphthaliX’s stockholders should keep in mind that OphthaliX’s directors and officers have interests in the Merger that are different from, or in addition to, the interests of its stockholders. These interests include, among other things:

 

as a condition to closing of the Merger, and as an inducement for Wize to enter into the Merger Agreement, OphthaliX is required, pursuant to a Stock Purchase Agreement, to sell on an “as is” basis to Can-Fite all the ordinary shares of Eyefite Ltd. (“EyeFite”), in exchange for the irrevocable cancellation and waiver of all indebtedness owed by OphthaliX and Eyefite to Can-Fite, including approximately $4.8 million of deferred payments owed by OphthaliX and Eyefite to Can-Fite and, as part of the purchase of Eyefite, Can-Fite will also assume certain accrued milestone payments in the amount of $175,000 under the exclusive license agreement described at the end of this paragraph. Immediately following the sale of Eyefite to Can-Fite, and prior to closing of the Merger, it is expected that OphthaliX’s sole asset shall consist of 446,827 ordinary shares of Can-Fite. In addition, as a condition to closing of the Merger, that certain exclusive license of Can-Fite’s CF101 drug candidate for the treatment of ophthalmic diseases granted to OphthaliX (the “Can-Fite License Agreement”) and that related services agreement (the “Can-Fite Services Agreement”) is required to be terminated pursuant to a Termination of License Agreement and a Termination of Services Agreement (see “AGREEMENTS RELATING TO THE MERGER” beginning on page 84 of this proxy statement/prospectus);

 

certain of OphthaliX’s directors and officers serve as directors and/or officers of Can-Fite;

 

at the request of Wize, Michael Belkin, a director of OphthaliX, will continue to serve as a director of OphthaliX upon completion of the Merger; and

 

the continued indemnification of current directors and officers of OphthaliX and the obtaining of a directors’ and officers’ liability “tail” insurance policy.

 

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For a more complete description of these interests, see “THE MERGER — Interests of OphthaliX’s Directors and Executive Officers in the Merger” beginning on page 69 of this proxy statement/prospectus.

 

Board Composition and Management of OphthaliX Following the Merger (Page 68)

 

Name of OphthaliX; Headquarters

 

Following the Merger, OphthaliX’s name will be changed to “Wize Pharma, Inc.” and Wize Pharma Ltd. will be OphthaliX’s wholly owned subsidiary. OphthaliX’s headquarters will be at Wize’s current headquarters at 5b Hanagar Street, Hod Hasharon, Israel.

 

Board of Directors

 

Pursuant to the terms of the Merger Agreement, Wize has selected, and OphthaliX has agreed to appoint, each of Ron Mayron, whom is currently a director of Wize, Yossi Keret, Dr. Franck Amouyal and Joseph Zarzewsky, to OphthaliX’s board of directors at the effective time of the Merger. Each of OphthaliX’s current directors, other than Professor Michael Belkin, will resign following the appointment of the above-mentioned directors. At the request of Wize, Professor Belkin will continue to serve as a director of OphthaliX after the Effective Time of the Merger.

 

Management

 

Following the Merger, OphthaliX will appoint Noam Danenberg, Wize’s current strategic advisor, to serve as Chief Operating Officer of OphthaliX post-merger and Or Eisenberg, Wize’s current Acting Chief Executive Officer and Chief Financial Officer, to serve as the Acting Chief Executive Officer and Chief Financial Officer of OphthaliX post-merger. OphthaliX’s current officers will resign following the appointment of the above-mentioned officers.

 

Appraisal Rights (Page 73)

 

OphthaliX stockholders will not have any appraisal rights under Delaware law in connection with the matters to be voted on at the OphthaliX annual meeting.

 

No Solicitation (Page 79)

 

The Merger Agreement contains provisions that make it more difficult for each of OphthaliX and Wize to encourage, solicit or initiate discussions or negotiations with, or engage in negotiations or discussions with, or provide non-public information to any person concerning a merger, consolidation, sale of substantially all assets or other similar transaction involving OphthaliX or Wize.

 

Conditions to Completion of the Merger (Page 81)

 

OphthaliX and Wize will complete the merger when all of the conditions to completion of the merger are satisfied or waived, including, among other things, approval of the proposals at the OphthaliX annual meeting, approval of the Merger and related transactions at the Wize special meeting, receipt of Israeli court approval of the Merger and related transactions (the “Israeli Court Approval”), receipt of the 104(h) Tax Ruling from the Israel Tax Authority, receipt of an exemption from the ISA and waiver or material performance of closing obligations of the parties under the merger agreement. See “THE MERGER AGREEMENT — Conditions to Completion of the Merger” on page 81 of this proxy statement/prospectus for a more complete summary of the conditions that must be satisfied prior to closing.

 

Listing of OphthaliX Common Stock; Delisting of Wize Ordinary Shares (Page 68)

 

OphthaliX common stock is currently quoted on the OTC Pink and trades under the symbol “OPLI.” In connection with and immediately prior to the Merger, OphthaliX will change its name to “Wize Pharma, Inc.” in accordance with Delaware law.

 

Wize ordinary shares are currently listed on TASE and trade under the symbol “WIZP.” Upon completion of the Merger, Wize ordinary shares will be delisted from TASE and there will no longer be a public trading market for Wize ordinary shares in Israel.

 

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Termination of the Merger Agreement (Page 82)

 

OphthaliX and Wize may terminate the Merger Agreement and decide not to proceed with the Merger at any time before completion if both parties agree. Either OphthaliX or Wize may terminate the Merger Agreement and decide not to proceed with the Merger at any time before the completion of the Merger if the Merger is not completed by October 30, 2017, subject to certain limitations. OphthaliX and Wize may also terminate the Merger Agreement as more fully described under the section entitled “THE MERGER AGREEMENT – Termination of the Merger Agreement” on page 82 of this proxy statement/prospectus.

 

Opinion of Pulvernis, Bareket, Ben-Yehuda Ltd., Wize’s Financial Advisor (Page C-1)

 

OphthaliX is not required to and due to lack of funds has not obtained an opinion from a financial advisor that the shares to be issued to or issuable to Wize shareholders is fair to OphthaliX’s stockholders from a financial point of view.

 

In connection with the Merger, Wize’s financial advisor, Pulvernis, Bareket, Ben-Yehuda Ltd. (“PBB”), delivered a written fairness opinion to the Wize board of directors concerning the fairness, from a financial point of view, of the exchange ratio being used in connection with the Merger, to Wize shareholders. The full text of PBB’s written opinion, dated June 20, 2017, is attached to this proxy statement/prospectus as Annex C. OphthaliX encourages you to read this opinion carefully in its entirety for a description of the procedures followed, assumptions made, matters considered and limitations on the review undertaken.

 

Comparison of the Rights of OphthaliX Stockholders and Wize Stockholders (Page 146)

 

OphthaliX is incorporated under the laws of the State of Delaware and Wize is formed under the laws of the State of Israel. If the Merger is completed, Wize shareholders will become stockholders of OphthaliX, and their rights will be governed by the Delaware General Corporation Law (“DGCL”), as well as the OphthaliX Certificate of Incorporation, as amended to reflect the proposals being voted on at the OphthaliX annual meeting (the “Amended OphthaliX Certificate of Incorporation”), and the OphthaliX Bylaws. The rights of OphthaliX stockholders contained in the OphthaliX Amended Certificate of Incorporation and OphthaliX Bylaws and the DGCL differ from the rights of Wize shareholders under Wize’s Articles of Association (the “Wize Articles”) and the Israeli Companies Law, as more fully described under the section entitled “COMPARISON OF RIGHTS OF HOLDERS OF OPHTHALIX SHARES AND WIZE SHARES” on page 146 of this proxy statement/prospectus.

 

Restrictions on Sales of Shares by Affiliates (Page 72)

 

The shares of OphthaliX common stock to be issued in connection with the Merger will be registered under the Securities Act and will be freely transferable under the Securities Act, except for shares of OphthaliX common stock issued or issuable to any person who is deemed to be an “affiliate” of Wize at the time of the Wize shareholders’ meeting. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or are under the common control of Wize and may include Wize’s executive officers and directors, as well as any significant stockholders.

 

Accounting Treatment (Page 72)

 

Although OphthaliX is the legal acquirer and will issue shares of its common stock to effect the Merger with Wize, the Merger is accounted for as a reverse recapitalization of OphthaliX by Wize. Under reverse recapitalization accounting, the assets and liabilities of OphthaliX will be recorded, as of the completion of the Merger, at their historical amounts. Consequently, the interim consolidated financial information of Wize reflect the operations of the acquirer for accounting purposes together with a deemed issuance of shares, equivalent to the shares held by the former stockholders of the legal acquirer and a recapitalization of the equity of the accounting acquirer. These interim consolidated financial information include the accounts of the Wize since the effective date of the reverse recapitalization and the accounts of OphthaliX since inception.

 

U.S. Federal Income Tax Considerations (Page 73)

 

OphthaliX believes that the Merger is expected to be a taxable exchange for U.S. federal income tax purposes. Assuming the Merger so qualifies, the following U.S. federal income tax consequences generally will result to a participating U.S. holder: (i) such holder generally will recognize gain or loss on the receipt of OphthaliX common stock in exchange for Wize ordinary shares in the Merger; (ii) such holder’s aggregate tax basis in the OphthaliX common stock received pursuant to the Merger will be equal to the fair market value of the OphthaliX common stock received by such U.S. holder on the date Wize ordinary shares are exchanged pursuant to the Merger and determined in good faith by the OphthaliX board of directors; and (iii) such holder’s holding period for the OphthaliX common stock will begin on the day following the date such U.S. holder’s Wize ordinary shares are exchanged pursuant to the Merger.

 

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Tax matters are very complicated, and the U.S. federal income tax consequences of the Merger to a particular OphthaliX stockholder will depend in part on such holder’s circumstances. Accordingly, OphthaliX urges you to consult your own tax advisor for a full understanding of the U.S. federal income tax consequences of the Merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws. For a more complete discussion of the U.S. federal income tax consequences of the Merger, see the section entitled “CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER” on page 138 of this proxy statement/prospectus.

 

Material Israeli Tax Considerations (Page 73)

 

In general, under the Israeli Tax Ordinance and the rules and regulations promulgated thereunder (the “Israeli Tax Ordinance”), the disposition of shares of an Israeli company is deemed to be a sale of capital assets (unless such shares are not held as a capital asset). The Israeli Tax Ordinance generally imposes a capital gains tax on the sale of capital assets located in Israel, including shares in an Israeli resident company, by both residents and non-residents of Israel, unless a specific exemption is available or unless a treaty for the prevention of double taxation between Israel and the seller’s country of residence provides otherwise. Assuming Wize receives the 104(h) Tax Ruling from the Israel Tax Authority for which Wize has applied, the Israeli income tax consequences of the Merger shall be in accordance with such tax ruling (if applicable to a particular Wize shareholder).

 

Tax matters are very complicated, and the Israeli tax consequences of the Merger to a particular Wize shareholder will depend in part on such shareholder’s circumstances. Accordingly, OphthaliX urges you to consult your own tax advisor for a full understanding of the Israeli tax consequences of the Merger to you, including the applicability and effect of federal, state, local and foreign income and other tax laws. For a more complete discussion of the material Israeli tax consequences of the Merger, see the section entitled “CERTAIN MATERIAL ISRAELI TAX CONSEQUENCES OF THE MERGER” on page 142 of this proxy statement/prospectus.

 

Regulatory Approvals (Page 71)

 

OphthaliX and Wize believe that the Merger does not raise antitrust or other significant regulatory concerns and that both parties will be able to obtain all requisite regulatory approvals prior to the anticipated closing. OphthaliX must comply with the applicable federal and state securities laws in connection with the issuance of shares of OphthaliX common stock in the Merger and the filing with the SEC of the registration statement of which this proxy statement/prospectus forms a part. The Merger and the other transactions contemplated under the Merger Agreement including a request to exempt OphthaliX from the need to publish a prospectus by reason of Section 15A(a)(3) of the Israel Securities Law are being effected in accordance with Sections 350 and 351 of the Israeli Companies Law. Wize is required to prepare and submit to the applicable Israeli court a motion to convene a special general meeting of the Wize shareholders (and, if necessary, creditors’ meetings) for the approval of the terms and conditions of the Arrangement by the requisite majority, which motion was submitted on August 10, 2017. For a more complete discussion of the regulatory approvals required in connection with the Merger, see the section entitled “THE MERGER — Regulatory Approvals Required for the Merger” on page 71 of this proxy statement/prospectus.

 

Emerging Growth Company (Page 20)

 

OphthaliX qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As an emerging growth company, OphthaliX may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies. These provisions include:

 

a requirement to provide only two years of audited financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

 

reduced disclosure about executive compensation arrangements;

 

no non-binding advisory votes on executive compensation or golden parachute arrangements; and

 

an exemption from the auditor attestation requirement in the assessment of internal control over financial reporting.

 

OphthaliX may take advantage of these provisions for up to five years or such earlier time that it is no longer an emerging growth company. OphthaliX would cease to be an emerging growth company on the date that is the earliest of (i) the last day of the fiscal year in which it has total annual gross revenues of $1 billion or more; (ii) the last day of its fiscal year following the fifth anniversary of the date of the completion of its initial public offering; (iii) the date on which it has issued more than $1 billion in nonconvertible debt during the previous three years; or (iv) the date on which it is deemed to be a large accelerated filer under the rules of the Securities and Exchange Commission.

 

To the extent that OphthaliX continues to qualify as a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Exchange Act, after it ceases to qualify as an emerging growth company, certain of the exemptions available to OphthaliX as an emerging growth company may continue to be available to OphthaliX as a smaller reporting company, including: (1) not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes Oxley Act; (2) scaled executive compensation disclosures; and (3) the requirement to provide only two years of audited financial statements, instead of three years.

 

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SELECTED HISTORICAL FINANCIAL INFORMATION OF OPHTHALIX

 

The following table sets forth selected historical financial information of OphthaliX for each of the periods presented (in thousands, except share and per share data). The selected financial information presented for each of the years ended December 31, 2016 and 2015 has been derived from OphthaliX’s audited consolidated financial statements and related notes which are included elsewhere in this proxy statement/prospectus. The statement of operations data for the six months period ended June 30, 2017 and 2016 and the balance sheet and other data as of June 30, 2017 have been derived from OphthaliX’s unaudited consolidated financial statements appearing elsewhere in this proxy statement/prospectus and have been prepared on the same basis as the audited consolidated financial statements. In the opinion of OphthaliX’s management, the unaudited data of OphthaliX reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information in those statements. OphthaliX’s historical results are not necessarily indicative of results that should be expected in the future, and the results for the six month period ended June 30, 2017 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017.

 

The following table should be read together with “INFORMATION ABOUT OPHTHALIX - Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 87 of this proxy statement/prospectus and OphthaliX’s audited consolidated financial statements for the years ended December 31, 2016 and 2015 and related notes and unaudited consolidated financial statement for the six months ended June 30, 2017 and 2016 related notes beginning on page F-1 of this proxy statement/prospectus.

 

  

Year Ended

December 31,

  

Six Months Ended

June 30,

 
   2016   2015   2017   2016 
   (in thousands) 
           Unaudited 
Statement of Operations Data:                
Operating expenses                
Research and development  $199   $812   $9   $128 
General and administrative   432    573    216    108 
Total operating expenses   631    1,385    225    236 
                   
Financial expenses, net   285    92    205    59 
                     
Net loss   916    1,477    430    295 
                     
Other comprehensive (income) loss   (34)   136    -    69 
                   
Comprehensive loss  $​882   $1,613   $430   $364 

 

   December 31,   June 30, 
   2016   2015   2017 
   (in thousands) 
           Unaudited 
Balance Sheet and other Data:            
Cash and cash equivalents  $13   $42   $18 
Investment in Parent Company   530    658    393 
Other accounts receivable   7    -    - 
Total assets   550    700    411 
                
Related company   4,459    3,690    4,758 
Other accounts payable and accrued expenses   251    291    243 
Total liabilities   4,710    3,981    5,001 
                
Total stockholders’ deficiency  $(4,160)  $(3,281)  $(4,590)

  

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SELECTED HISTORICAL FINANCIAL INFORMATION OF WIZE

 

The following table sets forth selected historical financial information of Wize for each of the periods presented (in thousands, except share and per share data). The selected financial information presented for each of the years ended December 31, 2016 and 2015 has been derived from Wize’s audited consolidated financial statements and related notes which are included elsewhere in this proxy statement/prospectus. The statement of operations data for the six months periods ended June 30, 2017 and 2016 and the balance sheet and other data as of June 30, 2017 have been derived from Wize’s unaudited consolidated financial statements appearing elsewhere in this proxy statement/prospectus and have been prepared on the same basis as the audited consolidated financial statements. In the opinion of Wize’s management, the unaudited data of Wize reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial information in those statements. Wize’s historical results are not necessarily indicative of results that should be expected in the future, and the results for the six month period ended June 30, 2017 are not necessarily indicative of the results to be expected for the full year ending December 31, 2017.

 

The following table should be read together with “INFORMATION ABOUT WIZE - Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 of this proxy statement/prospectus and Wize’s audited consolidated financial statements for the years ended December 31, 2016 and 2015 and related notes and unaudited consolidated financial statement for the six months ended June 30, 2017 and 2016 and related notes beginning on page F-32 of this proxy statement/prospectus.

 

   Year Ended
December 31,
   Six Months Ended
June 30,
 
   2016   2015   2017   2016 
   (in thousands) 
           Unaudited 
Statement of Operations Data:                
Operating expenses                
Research and development  $240   $1,204   $181   $118 
General and administrative   794    607    531    374 
Total operating expenses   1,034    1,811    712    492 
                   
Financial expenses, net   105    44    624    57 
                     
Net loss   1,139    1,855    1,336    549 
                     
Other comprehensive (income) loss   (3)   (2)   76    - 
                   
Comprehensive loss  $1,136   $1,853   $1,412   $549 

 

   December 31,   June 30, 
   2016   2015   2017 
   (in thousands) 
           Unaudited 
Balance Sheet and other Data:            
Cash and cash equivalents  $28   $423   $275 
Restricted bank deposit   10    10    11 
Other accounts receivable   29    30    46 
Property and equipment, net   2    2    3 
Total assets   69    465    335 
                
License purchase obligation   233    342    252 
Derivative liability for right to future investment   34    -    - 
Convertible loans, net   289    -    707 
Loans from controlling shareholder   117    -    - 
Other accounts payable and accrued expenses   227    129    367 
Receipt on account of shares   -    -    140 
Total liabilities   900    471    1,466 
                
Total shareholders’ deficit  $(831)  $(6)  $(1,131)

 

 9 

 

SELECTED UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA

  

The following selected unaudited pro forma consolidated financial data gives effect to the proposed merger of Merger Sub with and into Wize, which will be accounted for as a “reverse merger” under reverse recapitalization accounting with Wize treated as the accounting acquirer. The selected unaudited pro forma consolidated financial data presented below is based on, and should be read in conjunction with, the historical financial statements of OphthaliX and Wize that appear elsewhere in this proxy statement/prospectus and the unaudited pro forma consolidated combined financial data that appear elsewhere in this proxy statement/prospectus, including the footnotes thereto. See the sections entitled, “WHERE YOU CAN FIND MORE INFORMATION” and “UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS,” for additional information.

 

The following selected unaudited pro forma consolidated balance sheet data as of June 30, 2017 combines the historical consolidated balance sheet of Wize and OphthaliX for the same period, giving pro forma effect to the Merger as if the Merger had been completed on June 30, 2017. The following selected unaudited pro forma consolidated information of operations data for the year ended December 31, 2016 and the six months period ended June 30, 2017 combine the historical consolidated statements of operations data of Wize and OphthaliX for the same periods, giving pro forma effect to the Merger, as if the Merger had been completed on the first day of the period presented, respectively.

 

The selected unaudited pro forma consolidated financial data is presented for illustrative purposes only and is not necessarily indicative of the actual or future financial position or results of operations that would have been realized if the proposed merger had been completed as of the dates indicated in the unaudited pro forma consolidated financial data or that will be realized upon the consummation of the proposed merger.

 

Unaudited Pro Forma Combined Statements of Operations, Balance Sheet and Other Data:

 

   For the
Six Months
Ended
June 30,
2017
   For the
Year Ended December 31,
2016
 
   (in thousands, except per share amounts) 
Statements of Operations Data        
Loss from operations  $(1,120)  $(1,422)
Net loss  $(1,900)  $(1,718)
Net loss attributable to common stockholders  $(1,900)  $(1,718)
Net loss per share attributable to common stockholders, basic and diluted  $(0.02)  $(0.02)

 

   As of
June 30,
2017
 
   (in thousands) 
Balance Sheet Data    
Cash and cash equivalents  $1,132 
Working capital (*)  $2,792 
Total assets  $4,248 
Total liabilities  $1,453 
Accumulated deficit  $(28,809)
Total stockholders’ equity  $2,795 

 

(*)      Working capital is defined as current assets less current liabilities

 

 10 

 

COMPARATIVE HISTORICAL AND UNAUDITED PRO FORMA PER SHARE DATA

 

The information below reflects the historical net loss and book value per share of OphthaliX common stock and the historical net loss and book value per share of Wize ordinary shares in comparison with the unaudited pro forma net loss and book value per share after giving effect to the merger of OphthaliX with Wize on a pro forma basis. 

 

You should read the table below in conjunction with the audited and unaudited financial statements of OphthaliX, the audited and unaudited financial statements of Wize, the unaudited pro forma consolidated financial data and the notes related to such financial statements included elsewhere in this proxy statement/prospectus.

 

   As of and for the Year Ended December 31, 2016   As of and for the Six Month Period Ended June 30, 2017 
Wize Historical Per Common Share Data:        
Book value per share  $(0.05)   (0.06)
Basic and diluted net loss per share  $0.07    0.08 
OphthaliX Historical Per Common Share Data:          
Book value per share  $(0.40)   (0.44)
Basic and diluted net loss per share  $0.09    0.04 
Combined Company Pro Forma Per Common Share Data          
Book value per share  $-    0.03 
Basic and diluted net loss per share  $0.02    0.02 

 

MARKET PRICE AND DIVIDEND INFORMATION

 

OphthaliX

 

As of September 5, 2017, there were approximately 15 stockholders of record holding 10,441,251 shares of OphthaliX’s common stock. This number does not include an indeterminate number of stockholders whose shares are held by brokers in street name. The holders of OphthaliX’s common stock are entitled to one vote for each share held of record on all matters submitted to a vote of stockholders.  Holders of OphthaliX’s common stock have no preemptive rights and no right to convert their common stock into any other securities.  There are no redemption or sinking fund provisions applicable to OphthaliX’s common stock.

 

OphthaliX’s common stock is currently traded on the OTC Pink under the symbol “OPLI.”  

 

The following table sets forth the range of the high and low bid prices of the common stock for the periods indicated.

 

2017  HIGH   LOW 
First Quarter  $1.00   $0.35 
Second Quarter  $1.50   $0.11 
Third Quarter (through September 1, 2017)  $0.11   $0.11 

 

2016  HIGH   LOW 
First Quarter  $0.99   $0.99 
Second Quarter  $1.01   $0.36 
Third Quarter  $1.00   $0.45 
Fourth Quarter  $1.00   $1.00 

 

 

2015  HIGH   LOW 
First Quarter  $1.50   $0.50 
Second Quarter  $1.90   $0.70 
Third Quarter  $1.90   $0.35 
Fourth Quarter  $0.99   $0.99 

 

 

 11 

  

Dividends

 

Neither OphthaliX nor Wize has paid or declared any cash dividends since their respective inception. OphthaliX’s ability to pay cash dividends is subject to limitations imposed by state law. OphthaliX does not intend to declare or pay any such dividends in the foreseeable future.  

 

COMPARATIVE MARKET PRICE INFORMATION

 

OphthaliX common stock is currently quoted on OTC Pink and trades under the symbol “OPLI.” Wize ordinary shares are currently listed on TASE and trade under the symbol “WIZP”. The following table sets forth the closing sale prices per share of OphthaliX common stock and Wize ordinary shares on May 21, 2017, the last full trading day immediately preceding the public announcement of the Merger Agreement, and on September 7, 2017, the latest practicable date prior to the date of this proxy statement/prospectus. The table also includes the equivalent closing per share price of Wize ordinary shares on those dates. These equivalent closing per share prices reflect the fluctuating value of the OphthaliX common stock that Wize shareholders would receive in exchange for each Wize ordinary share if the Merger had been completed on either of these dates, applying the exchange ratio of 4.1781 shares of OphthaliX common stock for each Wize ordinary share.

 

Date 

OphthaliX

Common Stock

  

Wize

Ordinary Shares

  

Wize

Equivalent

Market

Value Per Share

 
May 21, 2017  $0.31   $0.47   $1.96
September 7, 2017  $0.11   $0.61   $2.55

 

 12 

 

RISK FACTORS

 

You should carefully consider the risks described below in evaluating whether to vote for or consent to the proposals discussed herein. The risks and uncertainties described below are not the only ones OphthaliX and Wize face, and these factors should be considered in conjunction with general investment risks and other information included in this proxy statement/prospectus, including the matters addressed in the section entitled “CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS” beginning on page 40 of this proxy statement/prospectus. You should read and consider the risks associated with the business of Wize beginning on page 23 of this proxy statement/prospectus because these risk factors will also affect the operations of OphthaliX post-Merger because the business of OphthaliX post-Merger will be Wize’s current business. In addition to the risks set forth below, new risks may emerge from time to time and it is not possible to predict all risk factors, nor can OphthaliX or Wize assess the impact of all factors on the merger and the combined company following the merger 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. Where this proxy statement/prospectus uses the words describing either OphthaliX or Wize, as the case may be, it is referring to such entity as a standalone company or to their respective lines of business and industry as they relate to the combined company. 

 

Risks Related to the Proposed Merger

 

The issuance of shares of OphthaliX common stock to Wize shareholders in the Merger will substantially dilute the voting power of current OphthaliX stockholders. Having a minority share position may reduce the influence that OphthaliX stockholders have on the management of OphthaliX.

 

Pursuant to the terms of the Merger Agreement, at the Effective Time of the Merger, OphthaliX will issue 93,971,259 shares of its common stock to Wize shareholders as merger consideration. As a result, upon completion of the Merger, the current OphthaliX stockholders will continue to hold 10,441,251 shares, or 10% of the issued and outstanding common stock of OphthaliX, and former Wize shareholders will own 93,971,259 shares, or 90% of the issued and outstanding common stock of OphthaliX (both percentages excluding (i) shares of common stock issuable upon the exercise of the Convertible Loans, (ii) shares of common stock issuable upon the exercise of the Future Investment Rights, (iii) shares of common stock issuable upon the exercise of warrants (the “PIPE Warrants”) to be issued as part of a private placement that Wize conducted in July and August 2017 for an aggregate amount of NIS 3.49 million (approximately $998,000) (the “2017 PIPE”) and (iv) shares of common stock issuable upon the exercise of certain options held by directors and officers of OphthaliX (the “OphthaliX Stock Options”). In the event all the Convertible Loans, Future Investment Rights, PIPE Warrants and OphthaliX Stock Options were to be exercised in full, then current OphthaliX stockholders and option holders would own 10,558,751 shares, and their combined ownership percentage would be reduced to approximately 5.4% of the issued and outstanding common stock of OphthaliX, and the former Wize shareholders and holders of Convertible Loans on a combined basis would own 185,538,350 shares, or approximately 94.6% of the issued and outstanding common stock of OphthaliX, assuming, for the purposes of this calculation, a total of 196,097,101 shares of OphthaliX common stock issued and outstanding on a fully diluted basis. Accordingly, the issuance of the shares of OphthaliX common stock to Wize shareholders in the Merger or issuance of OphthaliX common stock upon conversion or the exercise of the Convertible Loans, Future Investment Rights or Warrants to the respective holders of those securities will significantly reduce the ownership stake and relative voting power of each share of OphthaliX common stock held by current OphthaliX stockholders. Consequently, following the Merger, the ability of OphthaliX’s current stockholders to influence the management of OphthaliX will be substantially reduced. For more information relating to the Convertible Loans, Future Investment Rights and the 2017 PIPE, please see “INFORMATION ABOUT WIZE — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 of this proxy statement/prospectus. For more information regarding the beneficial ownership of Wize, please see “PRINCIPAL SHAREHOLDERS OF WIZE” beginning on page 136 of this proxy statement/prospectus

 

The exchange ratio in the Merger Agreement is not adjustable based on the market price of OphthaliX common stock so the merger consideration at the closing may have a greater or lesser value than at the time the Merger Agreement was signed.

 

Upon completion of the Merger, each Wize ordinary share will be converted into the right to receive shares of OphthaliX common stock based on the exchange ratio in the Merger Agreement. The exchange ratio in the Merger Agreement will not be adjusted in the event of any change in the stock price of OphthaliX prior to the Merger. Any changes in the market price of OphthaliX common stock before completion of the Merger will not affect the number of shares Wize shareholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger the market price of OphthaliX common stock declines from the market price on the date of the Merger Agreement, then Wize shareholders could receive merger consideration with substantially lower value. Similarly, if before the completion of the Merger the market price of OphthaliX common stock increases from the market price on the date of the Merger Agreement, then Wize shareholders could receive merger consideration with substantially more value for their ordinary shares. Because the exchange ratio does not adjust as a result of changes in the value of OphthaliX common stock, for each one percentage point that the market value of OphthaliX common stock rises or declines, there is a corresponding one percentage point rise or decline, respectively, in the value of the total merger consideration issued to Wize shareholders.

 

There is no assurance when or if the Merger will be completed. Any delay in completing the Merger may substantially reduce the benefits that OphthaliX and Wize expect to obtain from the Merger.

 

Completion of the Merger is subject to the satisfaction or waiver of a number of conditions as set forth in the Merger Agreement. There can be no assurance that OphthaliX and Wize will be able to satisfy the closing conditions or that closing conditions beyond their control will be satisfied or waived. For a discussion of the conditions to the completion of the Merger, see the section entitled “THE MERGER AGREEMENT — Conditions to Completion of the Merger” beginning on page 81 of this proxy statement/prospectus. If the Merger is not completed within the expected timeframe, such delay could result in additional transaction costs or other effects associated with uncertainty about the Merger.

 

 13 

 

OphthaliX and Wize can agree at any time to terminate the Merger Agreement, even if OphthaliX stockholders and Wize shareholders have already adopted the Merger Agreement and approved the Merger and the other transactions contemplated by the Merger Agreement. OphthaliX and Wize can also terminate the Merger Agreement under other specified circumstances. See the section entitled “THE MERGER AGREEMENT — Termination of the Merger Agreement” beginning on page 82 of this proxy and consent solicitation statement/prospectus.

 

If the Merger is not completed within the expected timeframe, such delay could result in additional transaction costs or other effects associated with uncertainty about the Merger. Furthermore, if the Merger is not completed, the ongoing business of Wize could be adversely affected and each of OphthaliX and Wize will be subject to a variety of risks associated with the failure to complete the Merger, including without limitation the following:

 

certain costs related to the Merger, such as legal and accounting fees, must be paid even if the Merger is not completed;

 

the attention of management of OphthaliX and Wize may have been diverted to the Merger rather than to each company’s own operations and the pursuit of other opportunities that could have been beneficial to each company;

 

the potential loss of key personnel during the pendency of the Merger as employees may experience uncertainty about their future roles with the combined company;

 

reputational harm due to the adverse perception of any failure to successfully complete the Merger;

 

the price of OphthaliX and Wize stock may decline and remain volatile;

 

OphthaliX and Wize will have been subject to certain restrictions on the conduct of their businesses which may have prevented them from making certain acquisitions or dispositions or pursuing certain business opportunities while the Merger was pending; and

 

each of OphthaliX and Wize may be subject to litigation related to the Merger or any failure to complete the Merger.

 

In addition, if the Merger Agreement is terminated, OphthaliX and Wize might have an immediate financial need to raise additional capital to meet their cash needs, including both transactional and operational expenses.

 

Directors and officers of OphthaliX may have interests in the Merger that are different from, or in addition to, those of OphthaliX stockholders generally that may influence them to support or approve the Merger.

 

The officers and directors of OphthaliX may have interests in the Merger that are different from, or are in addition to, those of OphthaliX stockholders generally. As a condition to closing of the Merger, OphthaliX is required, pursuant to a Stock Purchase Agreement, to sell on an “as is” basis to Can-Fite all the ordinary shares of OphthaliX’s wholly-owned subsidiary, Eyefite, in exchange for the irrevocable cancellation and waiver of all indebtedness owed by OphthaliX and Eyefite to Can-Fite, including approximately $4.8 million of deferred payments owed by OphthaliX and Eyefite to Can-Fite and, as part of the purchase of Eyefite, Can-Fite will also assume certain accrued milestone payments in the amount of $175,000 under the Can-Fite License Agreement. Immediately following the sale of Eyefite to Can-Fite, and prior to closing of the Merger, it is expected that OphthaliX’s sole asset shall consist of 446,827 ordinary shares of Can-Fite. In addition, as a condition to closing of the Merger, that certain exclusive license of Can-Fite’s CF101 drug candidate for the treatment of ophthalmic diseases granted to OphthaliX under the Can-Fite License Agreement and that related services agreement is required to be terminated pursuant to a Termination of License Agreement and a Termination of Services Agreement. Certain of OphthaliX’s directors and officers serve as directors and/or officers of Can-Fite and one of OphthaliX’s existing directors is expected to continue to serve as a director of OphthaliX post-Merger. In addition, the directors and executive officers of OphthaliX also have certain rights to indemnification or to directors’ and officers’ liability insurance that will survive the completion of the Merger. These interests may have influenced the directors and executive officers of OphthaliX to support or recommend the proposals presented to OphthaliX shareholders. See the sections entitled “THE MERGER — Interests of OphthaliX’s Directors and Executive Officers in the Merger” beginning on page 69 of this proxy statement/prospectus.

 

 14 

 

Directors and officers of Wize may have interests in the Merger that are different from, or in addition to, those of Wize shareholders generally that may influence them to support or approve the Merger.

 

The officers and directors of Wize may have interests in the Merger that are different from, or are in addition to, those of Wize shareholders generally. One of Wize’s existing directors is expected to serve as the Chairman of the Board of OphthaliX post-Merger and is engaged by Wize pursuant to a services agreement which provides him with certain benefits as more fully described in the “MANAGEMENT OF OPHTHALIX FOLLOWING THE MERGER” beginning on page 120 of this proxy statement/prospectus. In addition, Noam Danenberg, Wize’s strategic advisor, who is expected to serve as OphthaliX’s Chief Operating Officer following the Merger, is also the son-in-law of Mr. Avichay Harpaz, who owns 50% of Ridge Valley Corporation (“Ridge”). For more information about stock ownership, please see “PRINCIPAL SHAREHOLDERS OF WIZE” beginning on page 136 of this proxy statement/prospectus. In addition, the directors and executive officers of Wize also have certain rights to indemnification or to directors’ and officers’ liability insurance that will survive the completion of the Merger. These interests may have influenced the directors and executive officers of Wize to support or approve the Merger and the issuance of shares of OphthaliX common stock in the Merger.

 

OphthaliX’s board of directors relied solely on their own judgment in determining that the Merger is fair to its stockholders and, consequently, there is no independent corroboration of OphthaliX’s board of directors’ determination.

 

OphthaliX’s board of directors considered the factors set forth in the section entitled “THE MERGER —OphthaliX’s Reasons for the Merger” beginning on page 62 in determining that the Merger is fair to, and in the best interests of, its stockholders. OphthaliX is not required to and due to lack of funds has not obtained an opinion from a financial advisor that the shares to be issued to or issuable to Wize shareholders is fair to OphthaliX’s stockholders from a financial point of view. Accordingly, there is no independent corroboration of OphthaliX’s board of directors’ determination. Furthermore, OphthaliX’s directors have interests in the Merger that are different from, or in addition to, the interests of OphthaliX’s stockholders. See “THE MERGER— Interests of OphthaliX’s Directors and Executive Officers in the Merger” beginning on page 69 of this proxy statement/prospectus.

 

The fairness opinion obtained by Wize from its financial advisor will not reflect changes in circumstances after the date of the fairness opinion.

 

PBB, Wize’s financial advisor in connection with the Merger, has delivered to the board of directors of Wize its fairness opinion, dated June 20, 2017. The opinion stated to the effect that, based upon and subject to the assumptions, factors, qualifications and limitations set forth in the written opinion described in the opinion, as of May 21, 2017, the initial exchange ratio in the Merger was fair, from a financial point of view, to the holders of ordinary shares of Wize. As a result, Wize shareholders should be aware that the opinion does not address the fairness of the merger consideration at any time other than as of May 21, 2017. The opinion does not reflect changes that may occur or may have occurred after the date of such opinion, including changes to the operations and prospects of Wize, changes in general market and economic conditions or regulatory or other factors. Any such changes, or changes in other factors on which the opinion is based, may materially alter or affect the estimated valuation conclusions reached in such fairness opinion.

 

The announcement and pendency of the Merger could have an adverse effect on Wize’s business, financial condition, results of operations or business prospects.

 

The announcement and pendency of the Merger could disrupt Wize’s business in the following ways, among others:

 

the attention of Wize’s officers may be directed towards the completion of the Merger and other transaction-related considerations and may be diverted from the day-to-day business operations of Wize, as matters related to the Merger may require commitments of time and resources that could have otherwise been devoted to other opportunities that might have been beneficial to Wize;

 

Wize has and will continue to incur significant expenses related to the Merger prior to its closing; and

 

Wize may be unable to respond effectively to competitive pressures, industry developments and future opportunities.

 

Should they occur, any of these matters could adversely affect the business of, or harm the financial condition, results of operations or business prospects of Wize.

 

 15 

 

The ratio for the exchange of Wize ordinary shares for OphthaliX shares is fixed.

 

Each ordinary share of Wize will be exchanged for 4.1781 shares of OphthaliX common stock, subject to adjustment as set forth in the Merger Agreement. This ratio of the number of ordinary shares of Wize to be exchanged for each share of OphthaliX common stock will not change, unless Wize issues shares as part of any certain further equity financing prior to completion of the Merger. There will be no adjustment to this exchange ratio for changes in the market price of either OphthaliX common stock or Wize ordinary shares. In addition, neither OphthaliX nor Wize may terminate the Merger Agreement or “walk away” from the Merger solely because of changes in the market price of either company’s shares. Therefore, if the market value of OphthaliX common stock or Wize ordinary shares changes relative to the market value of the other, there will not be a change, either upward or downward, in the aggregate number of shares of OphthaliX common stock to be issued to Wize shareholders in the Merger. The share prices of OphthaliX common stock or Wize ordinary shares are by nature subject to the general price fluctuations in the market for publicly traded equity securities and have experienced significant volatility, and you should obtain recent market quotations for OphthaliX common stock or Wize ordinary shares. Neither OphthaliX nor Wize can predict or give any assurances as to the relative market prices of their shares before the closing of the Merger.

 

Covenants in the Merger Agreement place certain restrictions on each of OphthaliX’s and Wize’s conduct of business prior to the closing of the Merger, including entering into a business combination with another party.

 

The Merger Agreement restricts each of OphthaliX and Wize from taking certain specified actions with respect to the conduct of its business without the other party’s consent while the Merger is pending. These restrictions may prevent each of OphthaliX and Wize from pursuing otherwise attractive business opportunities or other capital structure alternatives and making other changes to its business or executing certain of its business strategies prior to the completion of the Merger, which could be favorable to OphthaliX stockholders or Wize shareholders. See “THE MERGER AGREEMENT— Covenants and Agreements” beginning on page 77 of this proxy statement/prospectus.

 

The rights of Wize shareholders who become OphthaliX stockholders in the Merger will be governed by the OphthaliX Certificate of Incorporation and the OphthaliX Bylaws, as amended.

 

Upon the consummation of the Merger, Wize’s outstanding ordinary shares will be converted into the right to receive shares of OphthaliX common stock. Wize shareholders who receive shares of OphthaliX common stock in the Merger will become OphthaliX stockholders. As a result, Wize shareholders who become stockholders in OphthaliX will be governed by the OphthaliX Certificate of Incorporation and the OphthaliX Bylaws, each as amended to reflect the proposals being voted on at the OphthaliX annual meeting, and the DGCL rather than being governed by the Wize Articles and the Israeli Companies Law. See the section entitled “COMPARISON OF RIGHTS OF HOLDERS OF OPHTHALIX SHARES AND WIZE SHARES” beginning on page 146 of this proxy statement/prospectus.

 

Because the market price of OphthaliX common stock will fluctuate, Wize shareholders cannot be sure of the trading price of the OphthaliX shares they will receive.

 

Upon completion of the Merger, each Wize ordinary share will be converted into the right to receive shares of OphthaliX common stock. The exchange ratio in the Merger Agreement will not be adjusted in the event of any change in the stock prices of OphthaliX or Wize prior to the Merger. There also will be a period of time between the date when stockholders of OphthaliX and shareholders of Wize vote on the Merger Agreement and the date when the Merger is completed. The relative prices of OphthaliX common stock and Wize ordinary shares may vary between the date of this proxy statement/prospectus, the dates of their respective shareholder meetings, and the date of completion of the Merger. The market price of OphthaliX common stock and Wize ordinary shares may change as a result of a variety of factors, including general market and economic conditions, changes in its business, operations and prospects, and regulatory considerations. Many of these factors are beyond the control of OphthaliX or Wize and are not necessarily related to a change in the financial performance or condition of OphthaliX or Wize. As OphthaliX and Wize market share prices fluctuate, based on numerous factors, the value of the shares of OphthaliX common stock that a Wize shareholder will receive will correspondingly fluctuate. Accordingly, the prices of OphthaliX common stock and Wize ordinary shares on the dates of their respective shareholder meetings may not be indicative of their prices immediately prior to completion of the Merger and the price of OphthaliX common stock after the Merger is completed. See the section entitled “MARKET PRICE AND DIVIDEND INFORMATION”. You are urged to obtain current market quotations for OphthaliX common stock and Wize ordinary shares.

 

 16 

 

Failure to complete the Merger could negatively affect the value of both OphthaliX common stock and Wize ordinary shares and the future business and financial results of both OphthaliX and Wize.

 

The Merger is subject to the satisfaction or waiver of certain closing conditions as described below in “THE MERGER AGREEMENT — Conditions to Completion of the Merger”.  No assurance can be given that each of the conditions will be satisfied.  In addition, the Merger Agreement may be terminated under the circumstances described below in “THE MERGER AGREEMENT — Termination of Merger Agreement.”

 

If the Merger is not completed, the ongoing businesses of OphthaliX and Wize could be adversely affected and each of OphthaliX and Wize will be subject to a variety of risks associated with the failure to complete the Merger, including without limitation the following:

 

diversion of management focus and resources from operational matters and other strategic opportunities while working to implement the Merger;

 

reputational harm due to the adverse perception of any failure to successfully complete the Merger; and

 

having to pay certain costs relating to the Merger, such as legal, accounting, financial advisory, filing and printing fees.

 

If the Merger is not completed, these risks could materially affect the market price of both OphthaliX common stock and Wize ordinary shares and the business and financial results of both OphthaliX and Wize.

 

OphthaliX and Wize may be subject to litigation in connection with the Merger.

 

Lawsuits may be filed against OphthaliX and Wize, their respective subsidiaries, and/or their respective directors or officers in connection with the Merger and the other transactions contemplated under the Merger Agreement. If any such lawsuit is filed, it could result in substantial costs and diversion of management’s attention and resources, which could adversely affect the business, financial condition, or results of operations of OphthaliX and Wize, whether or not a settlement or other resolution is achieved.

 

In addition, one of the conditions to the closing of the Merger Agreement is that no order, injunction, decree or other legal restraint or prohibition will be in effect that prevents completion of any of the transactions contemplated under the Merger Agreement. Consequently, if a lawsuit is filed and the plaintiffs secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting the consummation of the transactions contemplated under the Merger Agreement, that may prevent the Merger from becoming effective within the expected time frame or at all.

 

Risks Related to OphthaliX Following the Merger

 

If the Merger is consummated, the business operations, strategies and focus of OphthaliX will become those of Wize, and these changes may result in the depression in the value of its common stock.

 

Upon closing of the Merger, the business of OphthaliX shall become the current business of Wize. Consequently, if the Merger is consummated, an investment in OphthaliX’s common stock will represent an investment in the business operations, strategies and focus of Wize. 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 will significantly diminish the anticipated benefits of the Merger and have a material adverse effect on the business of OphthaliX post-merger. OphthaliX cannot assure you that OphthaliX’s business operations, strategies or focus will be successful following the Merger, and the Merger could depress the value of OphthaliX’s common stock.

 

The unaudited pro forma consolidated financial statements are presented for illustrative purposes only, and future results of OphthaliX may differ materially from the unaudited pro forma financial statements presented in this proxy statement/prospectus.

 

The unaudited pro forma consolidated financial statements contained in this proxy statement/prospectus are presented for illustrative purposes only and may not be an indication of OphthaliX’s financial condition or results of operations following the completion of the Merger for several reasons. The unaudited pro forma consolidated financial statements have been derived from the historical financial statements of OphthaliX and Wize and adjustments and assumptions have been made regarding OphthaliX after giving effect to the Merger. The information upon which these adjustments and assumptions have been made is preliminary, and these kinds of adjustments and assumptions are difficult to make with accuracy. Moreover, the pro forma financial statements do not reflect all costs that are expected to be incurred by OphthaliX in connection with the Merger. For example, the impact of any incremental costs incurred in integrating OphthaliX and Wize are not reflected in the pro forma financial statements. As a result, the actual financial condition and results of operations of OphthaliX following the completion of the Merger may not be consistent with, or evident from, these pro forma financial statements. The assumptions used in preparing the pro forma financial information may not prove to be accurate, and other factors may affect OphthaliX’s financial condition or results of operations following the Merger. Any decline or potential decline in OphthaliX’s financial condition or results of operations may cause significant variations in the market price of OphthaliX common stock.

 

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OphthaliX’s 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.”

 

OphthaliX is currently a “shell company” under applicable SEC rules and regulations, because it has no or nominal operations and either no or nominal assets, assets consisting solely of cash and cash equivalents, or assets consisting of any amount of cash and cash equivalents and nominal other assets.  Pursuant to Rule 144, promulgated under the Securities Act, sales of the securities of a shell company, such as OphthaliX under that rule are not permitted until at least 12 months have elapsed from the date on which OphthaliX files with the SEC Form 10 information in a Current Report on Form 8-K, reflecting its status as a non-shell company.  OphthaliX expects to file such Form 8-K following completion of the Merger. As a result, some of OphthaliX’s stockholders will 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 OphthaliX and its stockholders are in compliance with other requirements of Rule 144.  Further, it will be more difficult for OphthaliX to raise funding to support its operations through the sale of debt or equity securities unless it agrees to register such securities under the Securities Act, which could cause OphthaliX to expend additional time and cash resources.  The lack of liquidity of OphthaliX’s securities as a result of the inability to sell under Rule 144 for a longer period of time could cause the market price of OphthaliX’s securities to decline.

 

OphthaliX may issue additional equity securities in the future, which may result in dilution to existing investors.

 

To the extent OphthaliX raises additional capital by issuing equity securities, including in a debt financing where OphthaliX issues convertible notes or notes with warrants and any shares of OphthaliX’s common stock to be issued in a private placement, OphthaliX’s stockholders may experience substantial dilution. OphthaliX may, from time to time, sell additional equity securities in one or more transactions at prices and in a manner it determines. If OphthaliX sells additional equity securities, existing stockholders may be materially diluted. In addition, new investors could gain rights superior to existing stockholders, such as liquidation and other preferences. Furthermore, the number of shares available for future grant under OphthaliX’s equity compensation plans may be increased in the future. Moreover, the exercise or conversion of outstanding options or warrants to purchase shares of capital stock may result in dilution to OphthaliX’s stockholders upon any such exercise or conversion.

 

Because OphthaliX’s common stock may be a “penny stock,” it may be more difficult for investors to sell shares of its common stock, and the market price of its common stock may be adversely affected.

 

OphthaliX’s 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 their shares of OphthaliX’s 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 its 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 its common stock publicly at times and prices that they feel are appropriate.

 

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Because the Merger will be a reverse merger, OphthaliX may not be able to attract the attention of major brokerage firms, which may limit the liquidity of OphthaliX’s common stock and may make it more difficult for OphthaliX to raise additional capital in the future.

 

Additional risks may exist because the Merger will be a “reverse merger.” Certain SEC rules are more restrictive when applied to reverse merger companies, such as the ability of stockholders to resell their shares of common stock pursuant to Rule 144. In addition, securities analysts of major brokerage firms may not provide coverage of OphthaliX’s common stock because there may be little incentive for brokerage firms to recommend the purchase of OphthaliX common stock. As a result, OphthaliX’s common stock may have limited liquidity and investors may have difficulty selling it.  Furthermore, OphthaliX cannot assure you that brokerage firms will want to conduct any secondary offerings on OphthaliX’s behalf if it seeks to raise additional capital in the future.  OphthaliX’s inability to raise additional capital may have a material adverse effect on its business.

 

Wize shareholders may be required to pay taxes upon the receipt of shares of OphthaliX common stock in the Merger

 

Wize has filed an application to the Israel Tax Authority for a ruling, applicable to shareholders that are not otherwise exempt from Israeli tax on the Merger, to treat the Merger as a tax-deferred transaction for purposes of Israeli tax laws and, in accordance with Section 104H of the Israeli Tax Ordinance, to defer the tax event with respect to the exchange of the Wize ordinary shares for a limited period of two years from the date of exchange with respect to half of the Wize shares held by a shareholder and four years from the date of exchange with respect to such shareholder’s remaining Wize shareholdings, unless such shareholder sells its OphthaliX common stock received in the Merger earlier.  There is no assurance that such tax ruling will be obtained from the Israel Tax Authority prior to the Effective Time of the Merger, nor that, if it is obtained, it will provide the foregoing. If such tax ruling is not obtained prior to such time, OphthaliX or the applicable TASE member may deduct from the consideration payable for each Wize ordinary share withholding tax at the rate of twenty five per cent (25%) or in accordance with other instructions provided by the Israel Tax Authority.

 

Future sales of OphthaliX’s common stock could reduce OphthaliX’s stock price.

 

Sales by stockholders of substantial amounts of OphthaliX common stock after the Merger, or the perception that these sales may occur in the future, especially considering the restrictions set forth in the 104(h) Tax Ruling, could materially and adversely affect the market price of OphthaliX’s common stock. Furthermore, the market price of OphthaliX’s common stock could drop significantly if its executive officers, directors, or certain large shareholders sell their shares, or are perceived by the market as intending to sell them. For a discussion of the 104(h) Tax Ruling, see the section titled “CERTAIN MATERIAL ISRAELI TAX CONSEQUENCES OF THE MERGER” beginning on page 142 of this proxy statement/prospectus.

 

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

 

Following the Merger, the executive officers, directors, five percent or greater stockholders, and their respective affiliated entities of OphthaliX will in the aggregate beneficially own approximately 87.6% of OphthaliX’s outstanding common stock, assuming 104,412,510 shares of common stock outstanding. As a result of such ownership, despite the fact that each one of them, to Wize’s knowledge, will continue to operate independently from the other with respect to its respective shareholding of OphthaliX’s shares, these stockholders, if acting together, will have control over matters that require approval by OphthaliX’s 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 to prevent changes in control or in management. For more information about the current share ownership of Wize, please see “PRINCIPAL SHAREHOLDERS OF WIZE” beginning on page 136 of this proxy statement/prospectus.

 

OphthaliX may not be able to timely and effectively implement controls and procedures required by Section 404 of the Sarbanes-Oxley Act of 2002 that will be applicable to OphthaliX after the Merger.

 

Wize is not currently 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 Wize as 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 will be applicable to OphthaliX after the Merger. If management is not able to implement the additional requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner or with adequate compliance, it may not be able to assess whether its internal control over financial reporting is effective, which may subject OphthaliX to adverse regulatory consequences and could harm investor confidence and the market price of OphthaliX’s common stock.

 

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Subsequent to the consummation of the Merger, OphthaliX may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and stock price, which could cause you to lose some or all of your investment.

 

As a result of the Merger, Wize’s liabilities, including contingent liabilities, will be consolidated into OphthaliX’s financial statements. Although OphthaliX and Wize have conducted due diligence on each other, there can be no assurances that their diligence revealed all material issues that may be present in the other company’s business, that all material issues through a customary amount of due diligence will be uncovered, or that factors outside of OphthaliX’s and Wize’s control will not later arise. As a result, OphthaliX may be forced to later write-down or write-off assets, restructure operations, or incur impairment or other charges that could result in losses. Even if due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with each company’s preliminary risk analysis. Even though these charges may be non-cash items and not have an immediate impact on liquidity, the fact that OphthaliX reports charges of this nature could contribute to negative market perceptions about OphthaliX’s or its securities. In addition, charges of this nature may make future financing difficult to obtain on favorable terms or at all.

 

If unknown pre-Merger liabilities should arise, OphthaliX may be required to divert its cash from other business purposes to discharge such liabilities, which may have an adverse effect on its business.

 

As a condition to closing of the Merger, OphthaliX is required, pursuant to a Stock Purchase Agreement, to sell on an “as is” basis to Can-Fite all the ordinary shares of Eyefite, in exchange for the irrevocable cancellation and waiver of all indebtedness owed by OphthaliX and Eyefite to Can-Fite, including approximately $4.8 million of deferred payments owed by OphthaliX and Eyefite to Can-Fite. Nevertheless, there can be no assurance that this will release OphthaliX of all its liabilities.  If unknown liabilities arise, OphthaliX may be required to divert cash from other business purposes to discharge such liabilities, which may have an adverse effect on OphthaliX’s business.

 

As an “emerging growth company” under the JOBS Act, OphthaliX is permitted to, and intends to, rely on exemptions from certain disclosure requirements.

 

As an “emerging growth company” under the JOBS Act, OphthaliX is permitted to, and intends to, rely on exemptions from certain disclosure requirements.  OphthaliX is an emerging growth company until the earliest of: (i) the last day of the fiscal year during which OphthaliX has total annual gross revenues of $1 billion or more, (ii) the last day of the fiscal year following the fifth anniversary of the date of the first sale of its common stock pursuant to an effective registration statement, (iii) the date on which OphthaliX has, during the previous three-year period, issued more than $1 billion in non-convertible debt or (iv) the date on which OphthaliX is deemed a “large accelerated issuer” as defined in Regulation S-K of the Securities Act.  For so long as OphthaliX remains an emerging growth company, it will not be required to:

 

have an auditor report on its internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

 

comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis);

 

submit certain executive compensation matters to stockholders advisory votes pursuant to the “say on frequency” and “say on pay” provisions (requiring a non-binding stockholder vote to approve compensation of certain executive officers) and the “say on golden parachute” provisions (requiring a non-binding stockholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010; and

 

include detailed compensation discussion and analysis in its filings under the Exchange Act, and instead may provide a reduced level of disclosure concerning executive compensation. 

 

Although OphthaliX intends to rely on the exemptions provided in the JOBS Act, the exact implications of the JOBS Act are still subject to interpretations and guidance by the SEC and other regulatory agencies.  In addition, as its business grows, OphthaliX may no longer satisfy the conditions of an emerging growth company.

 

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OphthaliX has not paid, and does not intend to pay, dividends on its common stock and therefore, unless its common stock appreciates in value, its investors may not benefit from holding its common stock.

 

OphthaliX has not paid any cash dividends on its common stock since inception and does not anticipate paying any cash dividends its common stock in the foreseeable future.  As a result, investors in its common stock will not be able to benefit from owning its common stock unless the market price of its common stock becomes greater than the price paid for the stock by these investors.

 

Anti-takeover provisions under Delaware law could make an acquisition of OphthaliX, which may be beneficial to the stockholders of OphthaliX, more difficult and may prevent attempts by the stockholders to replace or remove management.

 

OphthaliX will be subject to the anti-takeover provisions of the DGCL, including Section 203. Under these provisions, if anyone becomes an “interested stockholder,” the combined company may not enter into a “business combination” with that person for three years without special approval, which could discourage a third party from making a takeover offer and could delay or prevent a change of control. For purposes of Section 203 of the DGCL, “interested stockholder” means, generally, someone owning 15% or more of the combined company’s outstanding voting stock or an affiliate of the combined company that owned 15% or more of the combined company’s outstanding voting stock during the past three years, subject to certain exceptions as described in Section 203 of the DGCL. In addition, the OphthaliX 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 the combined company. These provisions may have the effect of preventing or hindering any attempts by the stockholders of the combined company to replace its board of directors or management.

 

The public trading market for OphthaliX’s common stock is volatile and may result in higher spreads in stock prices, which may limit the ability of its investors to sell their shares at a profit, if at all.

 

OphthaliX’s common stock trades in the over-the-counter market and is quoted on the OTC Pink and subsequent to the Merger will continue to be quoted on the OTC Pink.  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 its 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 OphthaliX’s 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 its common stock wishes to sell the shares, the bid price will have sufficiently increased to create a profit on the sale.

 

Following the Merger, an active market for OphthaliX’s common stock may not develop.

 

Although OphthaliX’s common stock trades on the OTC Pink, it does not have an active trading market and following the Merger, 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 OphthaliX’s ability to raise capital by selling shares of its common stock and may impair its ability to enter into strategic partnerships or acquire companies or products by using its shares of common stock as consideration.

 

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OphthaliX’s 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 OphthaliX.

 

Under the OphthaliX Certificate of Incorporation, OphthaliX’s board is authorized to issue up to 1,000,000 shares of preferred stock, none of which are issued and outstanding as of the date of this proxy statement/prospectus.  Also, OphthaliX’s 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 its 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 its 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 OphthaliX 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 its common stock.  In addition, preferred shares would have preference in the event of liquidation of the corporation, which means that the holders of preferred shares would be entitled to receive the net assets of the corporation distributed in liquidation before the common stock holders receive any distribution of the liquidated assets.  OphthaliX has no current plans to issue any shares of preferred stock.

 

The market price of OphthaliX’s common stock may fluctuate significantly, which could result in substantial losses by its investors.

 

The market price of OphthaliX’s common stock may 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 OphthaliX or others;

 

announcements by OphthaliX of significant strategic partnerships, out-licensing, in-licensing, joint ventures, acquisitions or capital commitments;

 

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 its and its competitors’ results of operations;

 

changes in earnings estimates or recommendations by securities analysts, if its common stock is covered by analysts;

 

changes in government regulations or patent decisions;

 

developments by its 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 OphthaliX or its 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 its operating performance; and

 

the other factors described in the section entitled “RISK FACTORS” beginning on page 13 of this proxy statement/prospectus. 

 

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These factors and any corresponding price fluctuations may materially and adversely affect the market price of its common stock and result in substantial losses by its 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 OphthaliX’s common stock, which could cause a decline in the value of its common stock.  Price volatility of its common stock might be worse if the trading volume of its common stock is low.   In the past, following periods of market volatility, stockholders have often instituted securities class action litigation. If OphthaliX is involved in securities litigation, it could have a substantial cost and divert resources and attention of management from its business, even if successful.  Future sales of its common stock could also reduce the market price of such stock.

 

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 OphthaliX and its officers and directors or asserting U.S. securities laws claims in Israel.

 

Following the Merger, it is expected that OphthaliX’s directors and officers will not be residents of the United States and its assets will be located outside the United States. Service of process upon OphthaliX’s non-U.S. resident directors and officers and enforcement of judgments obtained in the United States against OphthaliX, and some of OphthaliX’s directors and officers may be difficult to obtain within the United States. OphthaliX has been informed by its 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 OphthaliX’s 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 OphthaliX and/or OphthaliX’s 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.

 

Risks Related to the Business of Wize

 

Wize has incurred operating losses since its inception and anticipates that it will continue to incur substantial operating losses for the foreseeable future.

 

Wize is a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including DES. Wize has 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, Wize has been financing its operations through numerous financing activities, including the issuance of ordinary shares and from loans from Ridge and Rimon Gold Assets Ltd. (“Rimon Gold”) and from third parties. Wize has historically incurred net losses, including net losses of approximately $1.1 million, $1.9 million and $1.3 million for the years ended 2016 and 2015 and for the six months ended June 30, 2017, respectively. At June 30, 2017, Wize had an accumulated deficit of approximately $24.8 million. Wize does not know whether or when it will become profitable. To date, Wize has not commercialized any products or generated any revenues from product sales and accordingly it does not have a revenue stream to support its cost structure. Wize’s losses have resulted principally from costs incurred in development and discovery activities. Wize expects to continue to incur losses for the foreseeable future, and these losses will likely increase as it:

 

initiates and manages pre-clinical development and clinical trials for LO2A;

 

seeks regulatory approvals for LO2A;

 

implements internal systems and infrastructures;

 

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seeks to license additional technologies to develop;

 

pays royalties and other payments related to an Exclusive Distribution and Licensing Agreement with Resdevco Ltd. (“Resdevco”), dated as of May 1, 2015, as amended and supplemented thereafter (the “LO2A License Agreement”);

 

hire management and other personnel; and

 

move towards commercialization.

 

No certainty exists that Wize 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, Wize may never become profitable. Even if Wize does achieve profitability, it may not be able to sustain or increase profitability on a quarterly or annual basis. Wize’s inability to achieve and then maintain profitability would negatively affect its business, financial condition, results of operations and cash flows. Moreover, Wize’s prospects must be considered in light of the risks and uncertainties encountered by an early-stage company and in highly regulated and competitive markets, such as the biopharmaceutical market, where regulatory approval and market acceptance of its products are uncertain. There can be no assurance that Wize’s efforts will ultimately be successful or result in revenues or profits.

 

Wize has substantial debt which may adversely affect Wize by limiting future sources of financing, interfering with Wize’s ability to pay interest and principal on the Convertible Loans and subjecting Wize to additional risks.

 

Wize has a significant amount of indebtedness. As of June 30, 2017, Wize had a total of NIS 5.1 million (approximately $1.5 million) of loans (including interest) outstanding under Convertible Loans, of which (1) Ridge extended a principal amount of NIS 1.0 million (approximately $0.3 million), (2) Rimon Gold extended a principal amount of NIS 3.0 million (approximately $0.9 million), and (3) Shimson Fisher (“Fisher”) extended a principal amount of NIS 1.0 million (approximately $0.3 million). If Wize incurs additional indebtedness to its current indebtedness levels, including other short or long-term credit facilities, the related risks that it now faces could increase. For more information relating to the Convertible Loans and the agreements relating thereto, please see “INFORMATION ABOUT WIZE – Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 of this proxy statement/prospectus.  

 

Wize’s substantial debt could have important consequences, including:

 

making it more difficult for Wize to satisfy its obligations with respect to the Convertible Loans and other obligations;

 

limiting Wize’s ability to obtain additional financing on satisfactory terms and to otherwise fund working capital, capital expenditures, and other general corporate requirements;

 

Wize’s ability to adjust to changing market conditions;

 

increasing Wize’s vulnerability to general adverse economic and industry conditions;

 

placing Wize at a competitive disadvantage compared to its competitors that have no debt or are less leveraged;

 

limiting Wize’s flexibility in planning for, or reacting to, changes in its business and the industry in which it operates; and

 

restricting Wize from making strategic acquisitions or exploiting business opportunities.

 

Wize’s assets are subject to security interests in favor of Rimon Gold. Wize’s failure to repay the Convertible Loans, if required, could result in legal action against Wize, which could require the sale of all of its assets.

 

In order to secure its obligations and performance pursuant to the Convertible Loans from Rimon Gold, Wize recorded a first priority fixed charge in favor of Rimon Gold on all of Wize’s rights, including its distribution rights, under the LO2A License Agreement, and a first priority floating charge on all of Wize’s rights, title and interest in all of its assets, as exist from time to time. If Wize is unable to repay the Convertible Loans from Rimon Gold when due, Rimon Gold could foreclose on Wize’s assets in order to recover the amounts due. Any such action would require Wize to curtail or cease operations.

 

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The Convertible Loans contain restrictive covenants that may limit Wize’s corporate activities, which could have an adverse effect on Wize’s financial condition and results of operations.

 

The Convertible Loans (including the Security Agreements associated therewith) contain a number of undertakings and restrictive covenants that, until the full repayment of such loans (including by way of conversion into Wize shares or, following the Effective Time, OphthaliX shares), limit its operating and financial flexibility. In addition, upon the closing of the Merger Agreement, OphthaliX is required to execute and deliver to Rimon Gold an Irrevocable Guaranty and Undertaking (the “OphthaliX Guaranty”) pursuant to which OphthaliX will irrevocably guarantee Wize’s obligations to Rimon Gold under the Convertible Loans. Furthermore, the OphthaliX Guaranty contains a number of restrictive covenants that limit OphthaliX’s operating flexibility. The covenants in the Convertible Loans (including the Security Agreements associated therewith) and the OphthaliX Guaranty include, among other things, limitations on the creations of liens; on the incurrence of indebtedness; on dispositions of assets, mergers, acquisitions and change of control transactions; on changes in the general nature of its business; and on the distribution of dividends. Such obligations may hinder each of Wize’s and OphthaliX’s (post-Merger) future operations or the manner in which it operates its business, which could have a material adverse effect on Wize’s business and OphthaliX’s (post-Merger) business, financial condition or results of operations. These restrictions could also limit Wize’s and OphthaliX’s (post-Merger) ability to plan for or react to market conditions or meet extraordinary capital needs or otherwise restrict corporate activities. These provisions, when taken as a whole, may also have the effect of making an acquisition of Wize or OphthaliX (post-Merger) more difficult and, consequently, also cause its shares to trade at prices below the price for which third parties might be willing to pay to gain control of Wize or OphthaliX, as applicable.

 

As a result of the restrictions in the Convertible Loans (including the Security Agreements associated therewith) and the OphthaliX Guaranty, or similar restrictions in Wize’s and/or OphthaliX’s future financing arrangements, Wize and/or OphthaliX may need to seek permission from its lenders in order to engage in certain corporate actions. Wize’s lenders’ interests may be different from Wize’s and/or OphthaliX’s and Wize and/or OphthaliX may not be able to obtain their permission when needed or at all. This may prevent Wize and/or OphthaliX from taking actions that it believes are in its best interest, which may adversely impact its revenues, results of operations and financial condition.

 

Wize will need to raise additional capital to meet its business requirements in the future, and such capital raising may be costly or difficult to obtain and will dilute current shareholders’ ownership interests.

 

The sources of financing at Wize’s disposal are estimated by Wize management to be currently insufficient (i) to conduct Wize’s 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 Wize will be able to secure the additional sources of finance it needs to perform the advanced and necessary stages of receiving regulatory approvals for marketing and distributing its 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 Wize’s business activity to a halt. As of June 30, 2017, Wize had cash and cash equivalents of approximately $275,000. Wize has expended and believes that it will continue to expend substantial resources for the foreseeable future developing LO2A. These expenditures will include costs associated with research and development, manufacturing, conducting clinical trials, as well as commercializing any products approved for sale. Because the outcome of Wize’s planned and anticipated clinical trials is highly uncertain, it 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 Wize, it 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, Wize may seek additional capital due to favorable market conditions or strategic considerations even if it believes it has sufficient funds for its current or future operating plans.

 

Wize’s future capital requirements will depend on many factors, including the progress and results of its 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 Wize pursues, 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, it is unable to estimate the amounts of increased capital outlays and operating expenditures associated with its anticipated clinical trials.

 

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Wize’s future capital requirements depend on many factors, including:

 

the need to service debt obligations under the Convertible Loans;

 

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 its 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 its 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, its future products, if any;

 

the expenses needed to attract and retain skilled personnel;

 

any product liability or other lawsuits related to its products;

 

the extent to which Wize acquires or invests 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 Wize needs them, on terms that are acceptable to Wize, or at all. If adequate funds are not available to Wize on a timely basis, Wize 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 its establishment of sales and marketing capabilities or other activities that may be necessary to commercialize LO2A.

 

Wize 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. Wize may also be required to recognize non-cash expenses in connection with certain securities it issues, such as convertible notes and warrants, which may adversely impact its financial condition.

 

According to management estimates, liquidity resources as of June 30, 2017 will not be sufficient to maintain Wize’s operations for the next twelve months which raises substantial doubt regarding its ability to continue as a going concern. If Wize does not continue as a going concern, investors could lose their entire investment.

 

According to management estimates, liquidity resources as of June 30, 2017, will not be sufficient to maintain Wize’s operations for the next 12 months. Wize’s inability to raise funds to conduct its research and development activities will have a severe negative impact on its ability to remain a viable company. These conditions raise substantial doubt about Wize’s ability to continue as a going concern. As such, the report of Wize’s independent registered public accounting firm on its audited financial statements as of and for the year ended December 31, 2016 contains an explanatory paragraph regarding substantial doubt about Wize’s ability to continue as a going concern. This explanatory paragraph could materially limit its ability to raise additional funds through the issuance of debt or equity securities or otherwise. Future reports on Wize’s annual financial statements may include an explanatory paragraph with respect to its ability to continue as a going concern.

 

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Raising additional capital may cause dilution to Wize’s existing shareholders, restrict its operations or require Wize to relinquish rights to LO2A. 

Wize may seek additional capital through a combination of private and public equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements. To the extent that Wize raises additional capital through the sale of equity or convertible debt securities, the ownership interests of existing shareholders will be diluted, and the terms may include liquidation or other preferences that adversely affect shareholder rights. Debt financing, if available, may involve agreements that include covenants limiting or restricting Wize’s ability to take certain actions, such as incurring debt, making capital expenditures or declaring dividends. If Wize raises additional funds through strategic partnerships and alliances and licensing arrangements with third parties, it may have to relinquish valuable rights to its LO2A, or grant licenses on terms that are not favorable. If Wize is unable to raise additional funds through equity or debt financing when needed, it may be required to delay, limit, reduce or terminate its product development or commercialization efforts or grant rights to develop and market LO2A that Wize would otherwise prefer to develop and market itself.  

If Wize fails to obtain necessary funds for its operations, it will be unable to maintain and improve its licensed technology, and it will be unable to develop and commercialize LO2A. 

Wize’s 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;

 

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

 

its success rate in preclinical and clinical efforts associated with milestones and royalties;

 

the costs of investigating patents that might block Wize from developing potential product candidates;

 

the costs of recruiting and retaining qualified personnel;

 

the time and costs involved in obtaining regulatory approvals;

 

its revenues, if any;

 

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

 

its need or decision to acquire or license complementary technologies or new platform or product candidate targets.

 

If Wize is unable to obtain the funds necessary for its operations, Wize will be unable to maintain and improve its licensed technology, and it will be unable to develop and commercialize its products and technologies, which would materially and adversely affect its business, liquidity and results of operations. 

Potential administrative enforcement proceedings may have an adverse effect on Wize's business and financial condition.

To Wize’s knowledge, the ISA is conducting an administrative inquiry regarding Wize’s public reports with the ISA in Israel regarding its applicable regulatory path necessary for the marketing of LO2A for the treatment of DES in the United States.  As part of the inquiry, the ISA requested Wize to provide certain documentation and has also questioned its officers with respect to such reports. Wize and its officers cooperated with the ISA and, at the ISA’s request, Wize also publicly filed a supplemental report to provide additional information in connection with the said regulatory path and marketing plans, which Wize believes contained all the required information. As of the date of this proxy statement/prospectus, it is uncertain whether such inquiry will lead to any administrative enforcement proceedings by the ISA, if at all. In the event the ISA commences enforcement proceedings against Wize or its office holders, this could result, among other things, in financial sanctions against Wize or its office holders, which can adversely effect Wize's business and financial condition.

Risks Related to the Wize’s Business and Regulatory Matters 

Wize has not yet commercialized LO2A, and may never become profitable. 

Although LO2A is approved for sale for certain indications in a limited number of jurisdictions, Wize has not yet commenced commercialization of LO2A, and may never be able to do so other than with respect to the entry into of distribution agreements in Israel and Ukraine, which are not expected to result in material revenues. Wize’s activity is influenced by the policies of regulatory authorities. Changes and developments in regulatory requirements or Wize’s failure to meet such requirements may lead to restrictions or delays in developing LO2A and cause material expenses for Wize. Wize does not know when or if it will complete any of its product development efforts of LO2A, obtain regulatory approval for any future product candidates incorporating its technologies or successfully commercialize any approved products. Even if Wize is successful in developing LO2A that is approved for marketing, it 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, it seeks;

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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;

 

its 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 Wize’s products or products incorporating its technologies. As a result, Wize is unable to predict the extent of future losses or the time required to achieve profitability, if at all. Even if Wize successfully develops one or more products that incorporate its technologies, it may not become profitable.

 

Wize’s current pipeline is based on a single compound, LO2A. Failure to develop LO2A will have a material adverse effect on Wize.

 

Wize has commenced two Phase II random, double-blind, placebo-controlled, clinical trials, in parallel groups and are intended for the repeated confirmation of the effectiveness and safety of LO2A for patients suffering from moderate to severe CCH. One trial is a multi-center trial in five different medical centers in Israel and the second trial is in a single medical center trial in Israel, with only Wize having access to the trial data. LO2A is at various stages of clinical development and may never be commercialized for the indications in the territories that Wize presently has 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 Wize’s business, operating results and financial condition to the extent Wize is unable to commercialize LO2A. In addition, Wize faces the risks of failure inherent in developing therapeutic products.

 

Furthermore, LO2A must satisfy rigorous standards of safety and efficacy before it can be approved by the U.S. Food and Drug Administration (the “FDA”), and any applicable foreign regulatory authorities for commercial use. The FDA and foreign regulatory authorities have full discretion over this approval process. Wize will need to conduct significant additional research, involving testing in animals and in humans, before it 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, Wize 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 Wize complies with all FDA requests, the FDA may ultimately reject one or more of its new drug applications (“NDA”) or grant approval for a narrowly intended use that is not commercially feasible.  Wize 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 its business by reducing the number of salable products and, therefore, corresponding product revenues.

 

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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, Wize’s clinical trials will delay the requisite filings with the FDA or any applicable foreign regulatory authority and, ultimately, its ability to commercialize LO2A and generate product revenues.  If the clinical trials do not support Wize’s product claims, the completion of development of such product candidates may be significantly delayed or abandoned, which will significantly impair its ability to generate product revenues and will materially adversely affect its 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 Wize’s 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 its clinical trials, delay approval of its product candidates, and/or jeopardize its ability to commence product sales and generate revenues.

  

Wize 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 Wize presently has 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 its 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 Wize from marketing its products. Patient acceptance of and demand for LO2A for which Wize obtains 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 its marketing and distribution efforts, the safety and effectiveness of alternative products, and the prevalence and severity of side effects associated with its products. If physicians, government agencies and other third-party payors do not accept Wize’s products, it 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, Wize may suffer delays or suspensions in future trials which would have a material adverse effect on its 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 Wize may encounter problems that cause it to abandon or repeat clinical trials. 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;

 

lack of healthy volunteers and patients to conduct trials;

 

inability to monitor patients adequately during or after treatment;

 

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failure of third party contract research organizations to properly implement or monitor the clinical trial protocols;

 

failure of institutional review boards to approve Wize’s clinical trial protocols;

 

inability or unwillingness of medical investigators and institutional review boards to follow Wize’s clinical trial protocols; and

 

lack of sufficient funding to finance the clinical trials. 

 

Wize has 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, Wize or regulatory authorities may suspend its clinical trials at any time if it appears that Wize is exposing participants to unacceptable health risks or if the regulatory authorities find deficiencies in its regulatory submissions or the conduct of these trials. Any suspension of clinical trials will delay possible regulatory approval, if any, and adversely impact its ability to develop products and generate revenue.

  

If Wize acquires or licenses additional technology or product candidates, it may incur a number of costs, may have integration difficulties and may experience other risks that could harm its business and results of operations.

 

Wize may acquire and license additional product candidates and technologies. Any product candidate or technology Wize licenses from others or acquires 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, Wize cannot assure you that any product candidate that it develops 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 Wize cannot effectively manage these aspects of its business strategy, its business may not succeed.

 

If any third party upon whom Wize relies to manufacture LO2A is unable to timely manufacture LO2A in compliance with current Good Manufacturing Practices (“cGMP”) and other regulations its business will be harmed.

 

Wize does not currently have the ability to manufacture the compounds that it needs to conduct its clinical trials and, therefore, relies upon, and intends to continue to rely upon, a certain contract manufacturer to produce and supply LO2A (including the active pharmaceutical ingredients, or APIs) for use in clinical trials and for future sales. If such manufacturer is unable to manufacture the compounds in a timely fashion or in compliance with current good manufacturing practices (cGMP) and other applicable regulations or if there is a strain on the relationship with such manufacturer, Wize’s clinical development programs may be delayed which could have a detrimental effect on its business.

  

The manufacture of LO2A is a chemical synthesis process and if its manufacturer encounters problems manufacturing LO2A, its 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. Wize has 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 Wize’s clinical research activities and its ability to market and develop LO2A.

 

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Wize does not currently have sales, marketing or distribution capabilities or experience, and is unable to effectively sell, market or distribute LO2A now and does 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 its business and results of operations.

  

Wize intends to enter into agreements with pharmaceutical companies and distributors with relevant marketing capabilities in the field of pharmaceuticals in order to use them to sell LO2A in countries around the world where Wize holds rights to sell LO2A. To date, Wize has entered into two distribution agreements to market LO2A for DES only. Wize does not currently have and does not expect to develop its own sales, marketing and distribution capabilities. If Wize is unable to enter into agreements with third parties to perform these functions, Wize will not be able to successfully market LO2A. In order to successfully market LO2A, Wize must make arrangements with third parties to perform these services.

 

As Wize does not intend to develop a marketing and sales force with technical expertise and supporting distribution capabilities, it will be unable to market LO2A directly. To promote any of its potential products through third parties, Wize 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 Wize is able to enter into may result in lower revenues than it could achieve by directly marketing and selling its potential products. In addition, to the extent that Wize depends on third parties for marketing and distribution, any revenues it receives will depend upon the efforts of such third parties, as well as the terms of its agreements with such third parties, which cannot be predicted in most cases at this time.  As a result, Wize might not be able to market and sell LO2A in the United States or overseas, which would have a material adverse effect on its business.

  

Wize faces significant competition and continuous technological change, and developments by competitors may render its products or technologies obsolete or non-competitive. If Wize cannot successfully compete with new or existing products, its marketing and sales will suffer and may not ever be profitable.

 

Wize is active in a competitive market. The fierce competition in the field and the introduction of new competitors to the field may negatively impact Wize’s monetary results. Wize 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 Wize, 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 Wize’s competitors develop and commercialize products faster, or develop and commercialize products that are superior to LO2A, Wize’s 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 its control. Competition in the biotechnology and biopharmaceutical industry is intense and has been accentuated by the rapid pace of technology development. Wize’s 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 Wize. These organizations also compete with Wize to:

 

attract parties for acquisitions, joint ventures or other collaborations;

 

license proprietary technology that is competitive with the technology Wize is developing;

 

attract funding; and

 

attract and hire scientific talent and other qualified personnel.

 

Wize’s competitors may succeed in developing and commercializing products earlier and obtaining regulatory approvals from the FDA and other foreign regulatory authorities more rapidly. Wize’s competitors may also develop products or technologies that are superior to those it is developing, and render LO2A or any future product candidate or technology obsolete or non-competitive. If Wize cannot successfully compete with new or existing products, its marketing and sales will suffer and may never be profitable.

 

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Wize 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 its sales would suffer, materially adversely affecting its business, financial condition and results of operations.

 

The clinical trials Wize carries out are with an insurance policy that allows the trials to be conducted. Accordingly, it is uncertain whether Wize will be able to complete its 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 Wize, it may incur substantial liabilities and may be required to limit the marketing and commercialization of LO2A. Wize’s business is exposed to potential product liability risks, which are inherent in the testing, manufacturing, marketing and sale of pharmaceutical products. Wize 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, Wize is unable to obtain sufficient insurance coverage on reasonable terms or to otherwise protect against potential product liability claims, Wize may be unable to clinically test, market or commercialize LO2A. A successful product liability claim brought against Wize in excess of its insurance coverage, if any, may cause Wize to incur substantial liabilities, and, as a result, its 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 Wize fails to comply with these requirements, Wize could lose these approvals, and the sales of any approved commercial products could be suspended.

 

Even if Wize receives 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 Wize or its 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 its products, if any. If Wize fails 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, Wize could be subject to administrative or judicially imposed sanctions or other setbacks, including the following:

 

restrictions on the products, manufacturers or manufacturing process;

 

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.

 

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If Wize or its 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 its results of operations.

 

Wize relies significantly on information technology and any failure, inadequacy, interruption or security lapse of that technology, including any cybersecurity incidents, could harm its ability to operate its business effectively.

 

Despite the implementation of security measures, Wize’s internal computer systems and those of third parties with which Wize contracts 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 its operations, and could result in a material disruption of its 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 Wize’s regulatory approval efforts and significantly increase its 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, Wize’s data or applications, or inappropriate disclosure of confidential or proprietary information, Wize could incur liability and its research and development programs and the development of LO2A could be delayed.

 

Wize may encounter difficulties in managing its growth.  Failure to manage its growth effectively will have a material adverse effect on its business, results of operations and financial condition.

 

Wize may not be able to successfully grow and expand. Successful implementation of its 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 Wize’s human and capital resources. To manage growth effectively, Wize will be required to continue to implement and improve its operating and financial systems and controls to expand, train and manage its employee base. Wize’s ability to manage its operations and growth effectively requires Wize to continue to expend funds to enhance its operational, financial and management controls, reporting systems and procedures and to attract and retain sufficient numbers of talented personnel. If Wize is unable to scale up and implement improvements to its control systems in an efficient or timely manner, or if Wize encounters deficiencies in existing systems and controls, then it will not be able to make available the products required to successfully commercialize its technology. Failure to attract and retain sufficient numbers of talented personnel will further strain its human resources and could impede its 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 Wize is unable to manage its growth effectively, it will have a material adverse effect on its business, results of operations and financial condition.

 

If Wize is unable to obtain adequate insurance, its financial condition could be adversely affected in the event of uninsured or inadequately insured loss or damage. Wize’s ability to effectively recruit and retain qualified officers and directors could also be adversely affected if it experiences difficulty in obtaining adequate directors’ and officers’ liability insurance.

 

Wize may not be able to obtain insurance policies on terms affordable that would adequately insure its business and property against damage, loss or claims by third parties. To the extent Wize’s business or property suffers any damages, losses or claims by third parties, which are not covered or adequately covered by insurance, its financial condition may be materially adversely affected.

 

Wize may be unable to maintain sufficient insurance as a public company to cover liability claims made against its officers and directors. If Wize is unable to adequately insure its officers and directors, it may not be able to retain or recruit qualified officers and directors to manage its business.

 

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Risks Related to Wize’s Intellectual Property

 

Wize’s ability to pursue the purchase, marketing, sale and distribution of LO2A depends upon the continuation of the LO2A License Agreement.

 

Wize does not own LO2A. Wize has entered into the LO2A License Agreement with Resdevco to license certain rights to LO2A (see the section entitled “INFORMATION ABOUT WIZE — LO2A License Agreement” beginning on page 93 of this proxy statement/prospectus). The LO2A License Agreement requires Wize to, among other things, make certain minimum royalty payments to Resdevco and meet certain regulatory milestones. If Wize does not meet its obligations under the LO2A License Agreement in a timely manner, or if Wize otherwise breaches the terms of the LO2A License Agreement, Resdevco could terminate the LO2A License Agreement and Wize would lose the rights to LO2A. From time to time, in the ordinary course of business, Wize 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 Wize’s business, prospects and results of operations.

 

Wize’s inability to expand its rights under the LO2A License Agreement may have a detrimental effect on its business.

 

Pursuant to the LO2A License Agreement, Wize has (i) the right to add additional territories in the future, subject to a commitment by Wize 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 Wize 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 Wize of certain minimum royalties. The LO2A License Agreement historically included an option for Wize to purchase from Resdevco all remaining territories for a fixed amount and such option was cancelled on March 30, 2017. The ability of Wize to exercise its rights mentioned above and to expand its business is subject to Wize having sufficient cash resources to make the applicable payments to Resdevco. If Wize does not have sufficient cash resources to make such payments, it will not be able to exercise its expansion rights under the LO2A License Agreement and its business may suffer.

 

The failure to obtain or maintain patents and other intellectual property could impact Wize’s ability to compete effectively.

 

Wize’s success, competitive position, and future revenues, if any, depend in part on its ability to obtain and successfully leverage intellectual property covering LO2A, know-how, methods, processes, and other technologies, to protect its trade secrets, to prevent others from using its intellectual property and to operate without infringing the intellectual property rights of third parties.

 

The risks and uncertainties that Wize faces with respect to its intellectual property rights include, but are not limited to, the following:

 

while any patents that Wize licenses under the LO2A License Agreement have been issued, their scope of protection is limited to the CCH indication in the United States;

 

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

 

Wize or Resdevco may be subject to interference proceedings;

 

Wize or Resdevco may be subject to opposition proceedings in foreign countries;

 

any patent that is issued may not provide meaningful protection;

 

Wize or Resdevco may not be able to develop additional proprietary technologies that are patentable;

 

other companies may challenge patents licensed or issued to Wize or its customers;

 

other companies may independently develop similar or alternative technologies, or duplicate Wize’s technologies;

 

other companies may design around technologies Wize have licensed or developed; and

 

enforcement of patents is complex, uncertain and expensive.

 

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If patent rights covering LO2A are not sufficiently broad or expire, they may not provide Wize 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 Wize or its 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 Wize owns or licenses from or to third parties may not provide any protection against its competitors.

 

Wize cannot be certain that patents will be issued as a result of any pending applications, and cannot be certain that any of its issued patents, including those licensed from Resdevco or any other third-party in the future, will give Wize adequate protection from competing products. For example, issued patents, including the patents licensed by Wize, may be circumvented or challenged, declared invalid or unenforceable, or narrowed in scope.

 

In addition, since publication of discoveries in the scientific or patent literature often lags behind actual discoveries, Wize cannot be certain that it or Resdevco were or will be the first to make its inventions or to file patent applications covering those inventions.

 

It is also possible that others may obtain issued patents that could prevent Wize from commercializing LO2A or require Wize to obtain licenses requiring the payment of significant fees or royalties in order to enable Wize to conduct its business. As to those patents that Wize has licensed, its rights depend on maintaining its obligations to the licensor under the applicable license agreement, and Wize may be unable to do so.

 

In addition to patents and patent applications, Wize depends upon trade secrets and proprietary know-how to protect its proprietary technology. Wize requires its employees, consultants, advisors and collaborators to enter into confidentiality agreements that prohibit the disclosure of confidential information to any other parties. Wize requires its employees and consultants to disclose and assign their ideas, developments, discoveries and inventions to Wize. These agreements may not, however, provide adequate protection for Wize’s trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure.

  

Costly litigation may be necessary to protect Wize’s or Resdevco’s intellectual property rights and Wize or Resdevco may be subject to claims alleging the violation of the intellectual property rights of others.

 

Wize’s activity in the field of life sciences exposes Wize to the possibility of legal proceedings connected with Wize’s business activities. Wize 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 Wize or Resdevco in pending applications, Wize 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 Wize, even if the eventual outcome was favorable to Wize. Wize, or its 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 Wize to cease using the technology or to license rights from prevailing third parties.

 

The cost to Wize of any patent litigation or other proceeding relating to its licensed patents or patent applications, even if resolved in its favor, could be substantial. Wize’s and Resdevco’s ability to enforce its patent protection could be limited by its financial resources, and may be subject to lengthy delays. If Wize is unable to effectively enforce its or Resdevco’s proprietary rights, or if Wize is found to infringe the rights of others, Wize may be in breach of its LO2A License Agreement. 

 

A third party may claim that Wize or Resdevco is using inventions claimed by their patents and may go to court to stop Wize or Resdevco from engaging in its 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 Wize or Resdevco is infringing the third party’s patents and will order Wize or Resdevco to stop the activities claimed by the patents, redesign its 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 Wize to pay the other party damages for having infringed their patents.

 

Moreover, there is no guarantee that any prevailing patent owner would offer Wize or Resdevco a license so that Wize 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 Wize or Resdevco with respect to its product candidates, technologies or other matters.

 

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Wize relies on confidentiality agreements of Wize or Resdevco that could be breached and may be difficult to enforce, which could result in third parties using its intellectual property to compete against Wize.

 

Although Wize believes that it takes reasonable steps to protect its 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 its employees and consultants while they are employed by Wize and Wize believes that Resdevco also takes such measures, the agreements can be difficult and costly to enforce. Although Wize, and Wize believes that its licensors’, seek to obtain these types of agreements from its contractors, consultants, advisors and research collaborators, to the extent that employees and consultants utilize or independently develop intellectual property in connection with any of its projects, disputes may arise as to the intellectual property rights associated with its products. If a dispute arises, a court may determine that the right belongs to a third party. In addition, enforcement of Wize’s and Resdevco’s rights can be costly and unpredictable. Wize and Resdevco also rely on trade secrets and proprietary know-how that Wize, and Wize believes that Resdevco seeks to protect in part by confidentiality agreements with employees, contractors, consultants, advisors or others. Despite the protective measures Wize and Resdevco employs, Wize still faces the risk that:

  

these agreements may be breached;

 

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

 

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

 

Wize’s competitors will independently develop similar technology or proprietary information.

 

Patent protection outside the United States is particularly uncertain, and if Wize is involved in opposition proceedings outside the United States, it 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 Wize’s 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 Wize’s business, results of operations and future prospects.  Moreover, Wize may participate in opposition proceedings to determine the validity of its foreign patents or its competitors’ foreign patents, which could result in substantial costs and divert management’s resources and attention.

 

Wize may not be able to enforce employees’ covenants not to compete and therefore may be unable to prevent its competitors from benefiting from the expertise of some of its former employees.

 

Wize has entered into non-competition agreements with its key employee and key consultant, in most cases within the framework of their employment agreements. These agreements prohibit such persons, if they cease working for Wize, from competing directly with Wize or working for its competitors for a limited period. Under applicable law, Wize may be unable to enforce these agreements. If Wize cannot enforce its non-competition agreements with such persons, then it may be unable to prevent its competitors from benefiting from the expertise of its former employees, which could materially adversely affect its business, results of operations and ability to capitalize on its proprietary information.

 

Intellectual property rights do not necessarily address all potential threats to Wize’s competitive advantage.

 

The degree of future protection afforded by Wize’s intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect its business, or permit Wize to maintain its 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 Wize has 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 Wize has exclusively licensed;

 

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

 

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Others may independently develop similar or alternative technologies or duplicate any of its technologies without infringing its intellectual property rights;

 

It is possible that any pending patent applications will not lead to issued patents;

 

Issued patents that Wize has exclusively licensed may not provide Wize with any competitive advantages, or may be held invalid or unenforceable, as a result of legal challenges by its competitors;

 

Wize’s competitors might conduct research and development activities in countries where Wize does not have patent rights and then use the information learned from such activities to develop competitive products for sale in its major commercial markets;

 

Wize may not develop additional proprietary technologies that are patentable; and

 

The patents of others may have an adverse effect on Wize’s business. 

 

Wize may be subject to claims challenging the inventorship of its patents and other intellectual property.

 

Wize may be subject to claims that former employees, collaborators or other third parties have an interest in its patents or other intellectual property as an inventor or co-inventor. For example, Wize may have inventorship disputes arise from conflicting obligations of consultants or others who are involved in developing its product candidates. Litigation may be necessary to defend against these and other claims challenging inventorship. If Wize fails in defending any such claims, in addition to paying monetary damages, it 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 its business. Even if Wize is successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

 

Risks Related to Wize’s Industry

 

Wize is subject to government regulations and it may experience delays in obtaining required regulatory approvals to market LO2A.

 

Various aspects of Wize’s 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 its 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 Wize. If Wize experiences significant delays in testing or receiving approvals or sign-offs to conduct clinical trials, its product development costs, or its 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 Wize receives in the future could also include significant restrictions on the use or marketing of its 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 Wize or LO2A. If approval is withdrawn for a product, or if a product were seized or recalled, Wize would be unable to sell or license that product and its revenues would suffer.

 

Wize expects the healthcare industry to face increased limitations on reimbursement as a result of healthcare reform, which could adversely affect third-party coverage of its products and how much or under what circumstances healthcare providers will prescribe or administer its products.

 

In both the United States and other countries, sales of Wize’s 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 Wize cannot predict the full effect on its business of the implementation of existing legislation, including the Affordable Care Act or the enactment of additional legislation, Wize believes that legislation or regulations that reduce reimbursement for or restrict coverage of its products could adversely affect how much or under what circumstances healthcare providers will prescribe or administer its products. This could materially and adversely affect its business by reducing its ability to generate revenue, raise capital, obtain additional collaborators and market its products. In addition, Wize believes 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.

 

Wize may be subject to U.S. and foreign anti-kickback laws and regulations. Wize’s 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 Wize could have a material adverse effect on Wize’s liquidity and financial condition. An investigation into the use by physicians of any of its products once commercialized may dissuade physicians from either purchasing or using them, and could have a material adverse effect on its ability to commercialize those products.

 

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Risks Related to Wize’s Operations in Israel

 

Potential political, economic and military instability in the state of Israel, where Wize’s senior management and its head executive office facilities are located, may adversely affect its results of operations.

 

Wize’s executive office where it conducts initial research and development activities, as well as some of its clinical sites and suppliers are located in Israel.  Wize’s officers and most of its directors are residents of Israel. Accordingly, political, economic and military conditions in Israel and the surrounding region may directly affect its 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 its operations and results of operations and could make it more difficult for Wize 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 its results of operations. For example, any major escalation in hostilities in the region could result in a portion of Wize’s employees and service providers being called up to perform military duty for an extended period of time. Parties with whom Wize does business have sometimes declined to travel to Israel during periods of heightened unrest or tension, forcing Wize to make alternative arrangements when necessary. In addition, the political and security situation in Israel may result in parties with whom Wize has 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 its business.

  

Wize’s 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, Wize cannot assure you that this government coverage will be maintained. Any losses or damages incurred by Wize could have a material adverse effect on its business. Any armed conflicts or political instability in the region would likely negatively affect business conditions and could harm its 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 its operating results, financial condition or the expansion of its business.

  

Wize’s operations may be disrupted as a result of the obligation of Israeli citizens to perform military service.

 

Many Israeli citizens 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. Wize’s operations could be disrupted by such call-ups. Such disruption could materially adversely affect its business, financial condition and results of operations.

  

Because a certain portion of Wize’s expenses is incurred in currencies other than the US Dollar, its results of operations may be harmed by currency fluctuations and inflation.

 

Wize’s reporting and functional currency is the U.S. Dollar, but some portion of its clinical trials and operations expenses are in NIS and Euro. As a result, Wize is exposed to some currency fluctuation risks, largely derived from Wize’s 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 Wize’s financing revenues and expenses. Wize may, in the future, decide to enter into currency hedging transactions to decrease the risk of financial exposure from fluctuations in the exchange rate of the currencies mentioned above in relation to the US Dollar. These measures, however, may not adequately protect Wize from adverse effects.

 

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

 

This proxy statement/prospectus and other documents incorporated by reference into this proxy statement/prospectus contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the use of forward-looking terms such as “anticipates,” “assumes,” “believes,” “can,” “could,” “estimates,” “expects,” “forecasts,” “guides,” “intends,” “is confident that,” “may,” “plans,” “seeks,” “projects,” “targets,” and “would” or the negative of such terms or other variations on such terms or comparable terminology. Such forward-looking statements include, but are not limited to, statements about the benefits of the proposed merger between OphthaliX and Wize including future financial and operating results, OphthaliX’s plans post-Merger, objectives, expectations and intentions, the expected timing of completion of the Merger and other statements that are not historical facts. Such statements are based upon the current beliefs and expectations of the respective managements of OphthaliX and Wize and are subject to significant risks and uncertainties that could cause actual outcomes and results to differ materially. Important factors that could cause actual results to differ materially from those indicated by such forward-looking statements include, without limitation, the risks and uncertainties set forth under the section entitled “RISK FACTORS” beginning on page 13 of this proxy statement/prospectus. These risks and uncertainties include, but are not limited to:

 

the occurrence of any event, change or other circumstances that could give rise to the termination of the Merger Agreement;

 

the inability to complete the Merger due to the failure to obtain stockholder approval or governmental or regulatory clearances or the failure to satisfy other conditions to the closing of the Merger or for any other reason;

 

legal or regulatory proceedings or other matters that affect the timing or ability to complete the Merger as contemplated;

 

the risk that the proposed Merger disrupts current plans and operations;

 

fluctuations in the market value of OphthaliX common stock and Wize ordinary shares;

 

the effects of the Merger on OphthaliX’s and Wize’s financial results;

 

disruption from the Merger making it difficult to maintain business and operational relationships;

 

diversion of management time on issues related to the Merger;

 

the risk that the businesses will not be integrated successfully, or that the integration will be more costly or more time consuming and complex than anticipated;

 

the risk that synergies anticipated to be realized from the Merger may not be fully realized or may take longer to realize than expected;

 

adverse developments in general market, business, economic, labor, regulatory and political conditions;

 

the amount of any costs, fees, expenses, impairments and charges related to the Merger;

 

the uncertainty regarding the adequacy of OphthaliX’s and Wize’s liquidity to pursue its business objectives;

 

the impact of any outbreak or escalation of hostilities on a national, regional or international basis, acts of terrorism or natural disasters;

 

competitive factors, including technological advances achieved and patents attained by competitors; and

 

the impact of any change to applicable laws and regulations affecting domestic and foreign operations, including those relating to trade, monetary and fiscal policies, taxes, price controls, regulatory approval of new products, licensing and healthcare reform.

 

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For a further list and description of such risks and uncertainties, see “RISK FACTORS” beginning on page 13, “INFORMATION ABOUT OPHTHALIX — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 87 and “INFORMATION ABOUT WIZE — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 of this proxy statement/prospectus. OphthaliX and Wize do not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are cautioned not to place undue reliance on these forward-looking statements, because, while the respective managements of OphthaliX and Wize believe the assumptions on which the forward-looking statements are based are reasonable, there can be no assurance that these forward-looking statements will prove to be accurate. This cautionary statement is applicable to all forward-looking statements contained in this proxy statement/prospectus.

 

THE COMPANIES

 

OphthaliX, Inc.

 

OphthaliX was a clinical-stage biopharmaceutical company focused on developing therapeutic products for the treatment of ophthalmic disorders. OphthaliX has in-licensed certain patents and patent applications protecting the use in the ophthalmic field of OphthaliX’s current pipeline drug under development, a synthetic A3 adenosine receptor, or A3AR, agonist, CF101 (known generically as IB-MECA).

 

On July 5, 2016, OphthaliX released top-line results from its Phase II trial with respect to the development of CF101 for the treatment of glaucoma or related syndromes of ocular hypertension. In this trial, no statistically significant differences were found between the CF101 treated group and the placebo group in the primary endpoint of lowering intra ocular pressure.

 

Subsequently, in September 2016, OphthaliX’s board of directors and Can-Fite consented in writing to, among other things, OphthaliX’s voluntary dissolution and liquidation pursuant to a Plan of Dissolution, that would result in OphthaliX’s complete dissolution and liquidation. The Plan of Dissolution was expected to go into effect 20 days after the date an information statement (the “Definitive Information Statement”) was first given to all OphthaliX’s shareholders who did not execute the written consent.

 

Prior to the distribution of the Definitive Information Statement, on November 10, 2016, OphthaliX’s board of directors abandoned its voluntary dissolution and liquidation. On the same day, OphthaliX’s board of directors authorized its entry into a non-binding letter of intent with Wize for a proposed reverse merger. Subsequently, on May 21, 2017, OphthaliX and the Merger Sub entered into the Merger Agreement with Wize. 

 

OphthaliX has no active business operations and is deemed to be a “shell company” as defined in Rule 12b-2 of the Exchange Act.

 

OphthaliX’s principal executive offices are located at10 Bareket Street, Petach Tikva, Israel, 4951778, its telephone number is +972 3 924 1114, and its website is located at www.ophthalix.com. This website is an inactive textual reference only and not an active hyperlink. The information on or that can be accessed through OphthaliX’s website is specifically not incorporated by reference into this proxy statement/prospectus, and is not a part of this proxy statement/prospectus.

 

Additional information about OphthaliX can be found in the section titled “INFORMATION ABOUT OPHTHALIX — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 87 and OphthaliX’s financial statements included elsewhere in this proxy statement/prospectus.

 

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Bufiduck Ltd.

 

Bufiduck Ltd., a company formed under the laws of the State of Israel, is a wholly owned subsidiary of OphthaliX, which was recently formed solely for the purpose of entering into the Merger Agreement and consummating the Merger and the other transactions contemplated by the Merger Agreement. It is not engaged in any business and has no material assets. In the Merger, Merger Sub will merge with and into Wize, with Wize surviving the Merger as OphthaliX’s wholly owned subsidiary, and Merger Sub will cease to exist.

 

Merger Sub is a wholly owned subsidiary of OphthaliX that was formed solely for the purpose of entering into the Merger Agreement and affecting the Merger and the other transactions contemplated by the Merger Agreement. It is not engaged in any business and has no material assets. Its principal executive offices have the same address and telephone number as OphthaliX set forth above.

 

Wize Pharma Ltd.

 

Wize is a clinical-stage biopharmaceutical company currently focused on the treatment of ophthalmic disorders, including DES. Wize has in-licensed certain rights to purchase, market, sell and distribute a formula known as LO2A, a drug developed for the treatment of DES, and other ophthalmological illnesses, including CCH, and Sjögren’s.

 

LO2A is currently registered and marketed by its inventor in Germany and Switzerland for the treatment of DES, in Hungary for the treatment of DES and CCH and in the Netherlands for the treatment of DES and Sjögren’s.

 

Wize intends to market LO2A as a treatment for DES and other ophthalmic inflammations, including CCH and Sjögren’s in the United States, Israel, Ukraine, the territories that it has licensed LO2A, and in additional territories, subject to obtaining the rights to market, sell and distribute LO2A in those additional territories. Wize believes that the potential for the most economic success is in marketing LO2A for treating CCH and Sjögren’s. Currently, Wize has a distribution agreement for marketing in Israel, where LO2A is approved for the treatment of DES only, and a distribution agreement for marketing in Ukraine, where LO2A is in the approval process for the treatment of DES and CCH. The registration process in certain countries, including the United States, requires Wize to conduct additional clinical trials, in addition to the Phase II clinical trials that Wize is currently conducting.

 

Wize plans to engage local or multinational distributors to handle the distribution of LO2A. In particular, Wize intends to engage, subject to obtaining the requisite rights in LO2A, pharmaceutical companies or distributors around the world with relevant marketing capabilities in the pharmaceutical field, in order for such pharmaceutical companies to sell LO2A, with Wize prioritizing those territories where Wize may expedite the registration process of LO2A based on existing knowledge and studies previously conducted on LO2A, without requiring additional studies.

 

Wize ordinary shares are currently traded on TASE and trade under the symbol “WIZP.”

 

Wize’s principal executive offices are located at 5b Hanagar Street, Hod Hasharon, Israel, and its telephone number is +972 72 260 0536. Wize does not have a website.

 

Additional information about Wize can be found in the sections titled “INFORMATION ABOUT WIZE  — Wize Business Description” beginning on page 91 and “INFORMATION ABOUT WIZE  — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 and Wize’s financial statements included elsewhere in this proxy statement/prospectus.

 

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THE ANNUAL MEETING OF OPHTHALIX STOCKHOLDERS

 

This section contains information for OphthaliX’s stockholders about the annual meeting of OphthaliX stockholders that has been called to consider the approval of the Authorized Share Increase Proposal, the Name Change Proposal, the Election of Directors Proposal and the Adjournment Proposal.

 

General

 

OphthaliX is furnishing this proxy statement/prospectus to the holders of OphthaliX common stock as of the record date in connection with the solicitation of proxies by the OphthaliX board of directors for use at the OphthaliX annual meeting and any adjournment or postponement of its annual meeting.

 

Date, Time and Place

 

The OphthaliX annual meeting will be held on October 10, 2017 at 4.00 p.m., local time, at 10 Bareket Street, Petach Tikva, Israel.

 

Purpose of the OphthaliX Annual Meeting

 

At the OphthaliX annual meeting, OphthaliX stockholders will be asked to consider and vote upon the following matters:

 

  (1) The Authorized Share Increase Proposal;
     
  (2) The Name Change Proposal;
     
  (3) The Election of Directors Proposal;
     
  (4) The Say on Pay Proposal;
     
  (5) The Say on Frequency Proposal;
     
  (6) The Auditor Ratification Proposal; and
     
  (7) The Adjournment Proposal.
     
(8)To transact such other business as may properly come before the annual meeting or any adjournment or postponement thereof.

 

It is important for you to note that in the event that the Authorized Share Increase Proposal, Name Change Proposal and Election of Directors Proposal does not receive the requisite vote for approval, then OphthaliX and Wize will not consummate the Merger.

 

Recommendation of the OphthaliX Board of Directors

 

The OphthaliX board of directors has determined that it is advisable and in the best interest of OphthaliX and its stockholders to enter into the Merger Agreement and the OphthaliX board of directors has authorized and approved the terms of the Merger Agreement and the transactions contemplated thereby. Certain factors considered by the OphthaliX board of directors in reaching its decision to adopt and approve the Merger Agreement and the Merger can be found in the section of this proxy statement/prospectus entitled “THE MERGER — OphthaliX’s Reasons for the Merger” beginning on page 62.

 

The OphthaliX board of directors unanimously recommends that OphthaliX stockholders vote “FOR” the Authorized Share Increase Proposal, “FOR” the Name Change Proposal, “FOR” each of the directors named in the Election of Directors Proposal, “FOR” the Say on Pay Proposal, “FOR” the one year alternative in the Say on Frequency Proposal, “FOR” the Auditor Ratification Proposal and “FOR” the Adjournment Proposal.

 

OphthaliX Record Date and Quorum

 

The OphthaliX board of directors has fixed the close of business on September 5, 2017 as the record date for the OphthaliX annual meeting. Only the holders of record of shares of OphthaliX common stock on the OphthaliX record date are entitled to receive notice of and to vote at the OphthaliX annual meeting or at any postponement(s) or adjournment(s) of the OphthaliX annual meeting.

 

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On the OphthaliX record date, there were 10,441,251 shares of OphthaliX common stock outstanding and entitled to vote at the OphthaliX annual meeting held by approximately 15 holders of record. Each share of OphthaliX common stock entitles the holder to one vote at the OphthaliX annual meeting on each proposal to be considered at the OphthaliX annual meeting.

 

The presence, in person or by proxy (including stockholders who abstain or do not vote with respect to one or more of the matters presented for stockholder approval), of the holders of shares of stock of OphthaliX entitled to cast at least 33⅓% of the total votes entitled to be cast by the holders of all outstanding capital stock of OphthaliX at the OphthaliX annual meeting is necessary to constitute a quorum to transact business.

 

Pursuant to the OphthaliX Bylaws, if a quorum fails to attend the annual meeting, the chair of the meeting may adjourn the meeting to another place, date, and time.

 

As of the close of business on the OphthaliX record date, the directors and executive officers of OphthaliX as well as Can-Fite are entitled to vote 8,629,752 shares of OphthaliX common stock, which represent, in the aggregate, approximately 82.6% of OphthaliX common stock outstanding on that date. OphthaliX currently expects that the directors and executive officers of OphthaliX as well as Can-Fite will vote their shares in favor of the Authorized Share Increase Proposal, the Name Change Proposal, each of the directors named in the Election of Directors Proposal, the Say on Pay Proposal, the one year alternative with respect to the Say on Frequency Proposal, the Auditor Ratification Proposal and the Adjournment Proposal.

 

In accordance with Delaware law, a list of stockholders entitled to vote at the meeting will be available at the meeting, and for 10 days prior to the meeting, at OphthaliX’s offices, 10 Bareket Street, Petach Tikva, Israel, 4951778, between the hours of 9:00 a.m. and 5:00 p.m., local time.

 

Vote Required for Approval

 

Approval of the Authorized Share Increase Proposal, the Name Change Proposal, the Say on Pay Proposal and the Adjournment Proposal requires the affirmative vote of holders of at least a majority of the votes cast at the annual meeting. Approval of the Election of Directors Proposal requires the affirmative vote of a plurality of the votes for each of the five director nominees. For the Say on Frequency Proposal, the option of every one year, two years, or three years that receives the highest number of affirmative votes cast will be the frequency deemed recommended by stockholders. Each of the Authorized Share Increase Proposal, Name Change Proposal and Election of Directors Proposal are conditioned upon each other.

 

Withholding Your Vote, Abstentions and Broker non-votes

 

In the Election of Directors Proposal, you can withhold your vote for any or all of the nominees. Withheld votes will be excluded entirely from the vote and will have no effect on the outcome. With regard to all other proposals, you can vote to “abstain.” If you vote to “abstain,” your shares will be counted as present at the meeting for purposes of determining whether a quorum exists, but such abstention will have no effect on the proposal.

 

A “broker non-vote” occurs when a broker submits a proxy without voting on one or more of the non-routine matters. A bank, brokerage firm or other nominee is not permitted by applicable regulatory requirements to vote on non-routine matters without instructions from the beneficial owner of the shares. The Authorized Share Increase Proposal, the Name Change Proposal, the Election of Directors Proposal, the Say on Pay Proposal, the Say on Frequency Proposal and Adjournment Proposal are deemed non-routine matters; consequently, absent instructions from you, your broker may not vote your shares on such proposals. Your broker may vote your shares on the Auditor Ratification Proposal. A broker non-vote is considered present at the meeting for purposes of determining whether a quorum exists but is not counted as a vote cast on any non-routine matter presented at the annual meeting.

 

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Manner of Submitting Proxy

 

Whether or not you plan to attend the OphthaliX annual meeting in person, you should submit your proxy as soon as possible. If you own shares of OphthaliX common stock in your own name, you are an owner or holder of record. This means that you may use the enclosed proxy card to tell the persons named as proxies how to vote your shares of OphthaliX common stock. You may vote your shares of OphthaliX common stock held of record in any of the following ways:

 

  In Person — To vote in person, come to the OphthaliX annual meeting and you will be able to vote by ballot. To ensure that your shares of OphthaliX common stock are voted at the OphthaliX annual meeting, the OphthaliX board of directors recommends that you submit a proxy even if you plan to attend the OphthaliX annual meeting.
     
  By Mail — To vote using the enclosed proxy card, simply complete, sign and date the enclosed proxy card and return it promptly in the enclosed return envelope. If you return your signed proxy card to OphthaliX before the OphthaliX annual meeting, the persons named as proxies will vote your shares of OphthaliX common stock as you direct.
     
  By Fax — To vote using the enclosed proxy card, simply complete, sign and date the enclosed proxy card and fax it to 646-536-3179. If you fax your signed proxy card to the foregoing number before the OphthaliX annual meeting, the persons name as proxies will vote your share of OphthaliX common stock as you direct.

 

The OphthaliX board of directors has appointed Pnina Fishman and Ronen Kantor to serve as proxies for the OphthaliX annual meeting.

 

If a proxy card is signed and returned without an indication as to how the shares of OphthaliX common stock represented by the proxy are to be voted with regard to a particular proposal, the OphthaliX common stock represented by the proxy will be voted “FOR” each such proposal. As of the date of this proxy statement/prospectus, OphthaliX has no knowledge of any business that will be presented for consideration at the OphthaliX annual meeting and which would be required to be set forth in this proxy statement/prospectus other than the matters set forth in the accompanying Notice of Annual Meeting of Stockholders of OphthaliX. In accordance with the OphthaliX Bylaws and Delaware law, business transacted at the OphthaliX annual meeting will be limited to those matters set forth in such notice.

 

Your vote as an OphthaliX stockholder is very important. Please submit your proxy as soon as possible, whether or not you plan to attend the OphthaliX annual meeting in person.

 

Shares Held in Street Name

 

If you are an OphthaliX stockholder and your shares are held in “street name” by a broker, bank or other nominee, you will receive instructions from your bank, brokerage firm or other nominee that you must follow in order to have your shares of OphthaliX common stock voted. Those instructions will identify which of the above choices are available to you in order to have your shares voted. You may not vote shares held in “street name” by returning a proxy card directly to OphthaliX or by voting in person at the OphthaliX annual meeting unless you provide a “legal proxy,” which you must obtain from your broker, bank or other nominee.

 

Revocation of Proxies and Voting Instructions

 

If your shares of OphthaliX common stock are registered in your own name, you may revoke your proxy in one of the following ways by:

 

Attending the OphthaliX annual meeting and voting in person. Your attendance at the OphthaliX annual meeting will not by itself revoke a proxy. You must vote your shares by ballot at the OphthaliX annual meeting to revoke your proxy;

 

Completing and submitting a new valid proxy card bearing a later date; or

 

  Sending written notice of revocation to OphthaliX at OphthaliX, Inc., Attn: Secretary, 10 Bareket Street, Kiryat Matalon, P.O. Box 7537, Petah-Tikva, Israel 49170 which notice must be received before 9.00 a.m., Eastern Time, on October 9, 2017.

 

If your shares of OphthaliX common stock are held in “street name”, your bank, broker or other nominee should provide instructions explaining how you may change or revoke your voting instructions.

 

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Tabulation of Votes

 

OphthaliX will appoint Ronen Kantor as inspector of election for the OphthaliX annual meeting to tabulate the affirmative and negative votes, broker non-votes and abstentions.

 

Solicitation of Proxies

 

The cost of solicitation of proxies from OphthaliX stockholders will be borne by OphthaliX. In addition to solicitation by use of the mail, proxies may be solicited by directors, officers and employees of OphthaliX in person or by telephone, telegram or other means of communication. These directors, officers and employees will not receive additional compensation for their efforts but will be reimbursed for reasonable out-of-pocket expenses they incur in connection with the solicitation. OphthaliX will reimburse brokerage firms and other custodians, nominees and fiduciaries for their reasonable out-of-pocket expenses incurred in forwarding of solicitation materials to the beneficial owners of OphthaliX common stock and collecting voting instructions.

 

Other Business

 

OphthaliX does not expect that any matter other than the proposals presented in this proxy statement/prospectus will be brought before OphthaliX’s annual meeting. However, if other matters incident to the conduct of the annual meeting are properly presented at the annual meeting or any adjournment, postponement, or continuation of the annual meeting, the persons named as proxies will vote in accordance with their best judgment with respect to those matters.

 

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PROPOSALS SUBMITTED TO OPHTHALIX STOCKHOLDERS 

 

PROPOSAL 1 — AUTHORIZED SHARE INCREASE PROPOSAL

 

General

 

The OphthaliX Certificate of Incorporation currently authorizes 100,000,000 shares of common stock, par value $0.001 per share and 1,000,000 shares of series preferred stock, par value $0.001 per share. As of September 5, 2017, there were 10,441,251 shares of common stock issued and outstanding and no shares of series preferred stock issued and outstanding. Of the remaining authorized but unissued shares of common stock, 1,088,888 shares are reserved for issuance upon the exercise of outstanding stock options under OphthaliX’s 2012 Stock Incentive Plan. As a result, OphthaliX currently has only 88,469,861 authorized but unissued shares of common stock that are unreserved and available for future issuance.

 

In order to complete the Merger, OphthaliX must issue approximately 93,971,259 shares of OphthaliX common stock to Wize shareholders. In addition, since at the Effective Time of the Merger, the Convertible Loans will become convertible into shares of OphthaliX common stock, OphthaliX could be required to issue up to an additional 32,565,823 shares of OphthaliX common stock upon conversion of the Convertible Loans and a further 37,128,914 shares of OphthaliX common stock upon the exercise of Future Investment Rights (see “INFORMATION ABOUT WIZE —  Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 of this proxy statement/prospectus for further information about the Convertible Loans and Future Investment Rights). Furthermore, in the 2017 PIPE, Wize undertook to cause OphthaliX to grant the PIPE Warrants, which PIPE Warrants shall be exercisable into an aggregate of 21,872,354 shares of OphthaliX common stock, after giving effect to an exchange ratio of 4.1781 shares of OphthaliX common stock for each one Wize ordinary share.

 

In the future, OphthaliX may need additional authorized but unissued shares available for issuance, from time to time, as may be necessary in connection with future financings, investment opportunities, acquisitions of other companies, the declaration of stock dividends, stock splits or other distributions, or for other corporate purposes.

 

The text of the proposed amendment of the OphthaliX Certificate of Incorporation to effect the authorized share increase solely to the extent such amendment relates to the authorized share increase is set forth in Annex D to this Proxy Statement. Stockholders are urged to carefully read Annex D.

 

Principal Effects of the Authorized Share Increase

 

The additional common stock to be authorized by adoption of the amendment would have rights identical to the currently outstanding common stock. Adoption of the proposed amendment and issuance of the common stock would not affect the rights of the holders of currently outstanding common stock, except for effects incidental to increasing the number of shares of the common stock outstanding, such as the dilutive impact to existing holders of common stock and their voting rights. The common stock has no preemptive rights. If the amendment is adopted and approved, it will become effective upon filing the amendment to the OphthaliX Certificate of Incorporation with the Secretary of State of the State of Delaware or at such later date specified therein.

 

Vote Required for Approval

 

Approval of the Authorized Share Increase Proposal requires the affirmative vote of a majority of the votes cast for or against the proposal at the OphthaliX annual meeting, assuming a quorum is present. Adoption of the Authorized Share Increase Proposal is conditioned upon the approval of the Name Change Proposal and the Election of Directors Proposal.

 

Recommendation of Board of Directors

 

After careful consideration, OphthaliX’s Board of Directors has unanimously adopted a resolution approving, and recommending to its stockholders to approve a proposal to amend the OphthaliX Certificate of Incorporation to increase the number of authorized shares of common stock from 100,000,000 shares to 500,000,000 shares.

 

THE OPHTHALIX BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OPHTHALIX STOCKHOLDERS VOTE “FOR” THE AUTHORIZED SHARE INCREASE PROPOSAL.

 

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PROPOSAL 2 — NAME CHANGE PROPOSAL

 

General

 

OphthaliX is asking its stockholders to approve an amendment to the OphthaliX Certificate of Incorporation to change the name of OphthaliX to “Wize Pharma, Inc.” immediately prior to the Merger. If the amendment is approved, it will become effective upon filing the amendment to the OphthaliX Certificate of Incorporation with the Secretary of State of the State of Delaware or at such later date specified therein.

 

The text of the proposed amendment of the OphthaliX Certificate of Incorporation to effect the name change solely to the extent such amendment relates to the name change is set forth in Annex D to this Proxy Statement. Stockholders are urged to carefully read Annex D.

 

Principal Effects of the Name Change Amendment

 

The change of OphthaliX’s name to Wize Pharma, Inc. will not by itself affect in any way the validity of currently outstanding stock certificates or the trading of OphthaliX’s securities. OphthaliX’s stockholders will not be required to surrender or exchange any of OphthaliX’s stock certificates that they currently hold. Stockholders with certificated shares may continue to hold their existing certificates or receive new certificates reflecting the name change upon tendering their old certificates to OphthaliX’s transfer agent.

 

Vote Required for Approval

 

Approval of the Name Change Proposal requires the affirmative vote of a majority of the votes cast for or against the proposal at the OphthaliX annual meeting, assuming a quorum is present. Adoption of the Name Change Proposal is conditioned upon the approval of the Authorized Share Increase Proposal and Election of Directors Proposal.

 

Recommendation of Board of Directors

 

After careful consideration, OphthaliX’s Board of Directors has unanimously adopted resolutions approving, and recommending to its stockholders to approve a proposal to amend the OphthaliX Certificate of Incorporation to change the name of OphthaliX to “Wize Pharma, Inc.” immediately prior to the Merger.

  

THE OPHTHALIX BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OPHTHALIX STOCKHOLDERS VOTE “FOR” THE NAME CHANGE PROPOSAL.

 

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PROPOSAL 3 — ELECTION OF DIRECTORS PROPOSAL

 

General

 

At the annual meeting, five nominees will be elected as directors.  OphthaliX’s board of directors currently consists of five members, all of whom are standing for re-election at the annual meeting.  The directors elected at the annual meeting will serve until the earlier of the next annual meeting where directors will be appointed, such director’s successor is elected and qualified, or until such director’s earlier resignation or removal; provided, however, that, if the Merger is completed, the board of directors of OphthaliX will be reconstituted as described in this proxy statement/prospectus.

 

OphthaliX’s board of directors has nominated each of Dr. Pnina Fishman, Dr. Ilan Cohn, Guy Regev, Dr. Roger Kornberg, and Dr. Michael Belkin to stand for re-election at the annual meeting.

 

OphthaliX’s Board of Directors and Management

 

The following table sets forth the members of OphthaliX’s executive officers and board of directors:

 

Member   Position   Age  
           
Pnina Fishman, Ph.D.   Chairman and Chief Executive Officer   69  
           
Itay Weinstein.   Chief Financial Officer   46  
           
Ilan Cohn, Ph.D.   Director   62  
           
Guy Regev   Director   48  
           
Roger Kornberg, Ph.D.   Director   70  
           
Michael Belkin, Ph.D.   Director   75  

 

Pnina Fishman, Ph.D.  Pnina Fishman has served as OphthaliX’s Chairman of the Board since November 2011 and OphthaliX’s Chief Executive Officer since June 2014. She has also served as OphthaliX’s Chief Executive Officer from November 2011 through December 2012. Dr. Fishman co-founded Can-Fite and has served as Can-Fite’s Chief Executive Officer and served on its board of directors since September 2005. Dr. Fishman is the scientific founder of Can-Fite and was previously a professor of Life Sciences and headed the Laboratory of Clinical and Tumor Immunology at the Felsenstein Medical Research Institute, Rabin Medical Center, Israel. Dr. Fishman has authored or co-authored over 150 publications and presented the findings of her research at many major scientific meetings. Her past managerial experience included seven years as Chief Executive Officer of Mor Research Application, the technology transfer arm of Clalit Health Services, the largest healthcare provider in Israel. Mor Research Application was also the first clinical research organization in Israel. Dr. Fishman currently also serves as a member of the board of directors of F.D Consulting Ltd., Ultratrend Ltd., and EyeFite Ltd. Dr. Fishman holds a Ph.D. in Immunology from the Bar Ilan University in Ramat Gan, Israel. Dr. Fishman’s qualifications to serve on OphthaliX’s board of directors include her senior management experience as Co-Founder and Chief Executive Officer of Can-Fite, her prior managerial experience and her scientific expertise in the field of life sciences.

 

Itay Weinstein. Itay Weinstein has served as OphthaliX’s Chief Financial Officer since November, 2011. He is a Partner at Shimony C.P.A. and has been employed there since 1999.   Mr. Weinstein is also controller for Can-Fite and has served as such since 2003. Prior to that, Mr. Weinstein served as auditor at Oren Horowitz.  Mr. Weinstein holds a B.A. in economics and accounting from the Tel Aviv University, Israel, and has been a licensed CPA since 1999.  Mr. Weinstein is a board member of Uno Management and Consulting Ltd. 

 

Ilan Cohn, Ph.D. Ilan Cohn has served on OphthaliX’s board since November 2011. He is a patent attorney and senior partner at the patent attorney firm Reinhold Cohn and Partners, where he has been an attorney since 1986. Dr. Cohn co-founded Can-Fite, served as its Chief Executive Officer until September 2004, served on OphthaliX’s board of directors since 1994 and since May 30, 2013, serves as the Chairman of the Can-Fite board of directors. Dr. Cohn holds a Ph.D. in biology and is a patent attorney with many years of experience in the biopharmaceutical field. He has served on the board of directors of a number of life science companies, including Discovery Laboratories Inc. (formerly Ansan Pharmaceuticals), a U.S. public company. Dr. Cohn has also been involved in the past in management of venture capital funds focused on investments in the life sciences industry. Dr. Cohn served a number of years as a co-chairman of the Biotech Committee of the US-Israeli Science and Technology Commission. Dr. Cohen is also currently a member of the board of directors of I.C.R.C Management Ltd, Famillion BVI Ltd. and Famillion Ltd. (a subsidiary of Famillion BVI Ltd.). Dr. Cohn holds a Ph.D. in Biology from the Hebrew University of Jerusalem. Dr. Cohn’s qualifications to serve on OphthaliX’s board of directors include his senior management experience as Co-Founder and former Chief Executive Officer of Can-Fite, his service on the boards of life sciences companies, including on the board of Can-Fite, and his knowledge of the industry as an investor and legal counsel to numerous companies.

 

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Guy Regev. Guy Regev has over twelve years of experience in accounting, financial management and control and general management of commercial enterprises. He has served on OphthaliX’s Board of Directors since November 2011. Mr. Regev has also been a director of Can-Fite since July 2011 and has served as a member of Can-Fite’s audit and compensation committees since February 2014. Mr. Regev is currently the Chief Executive Officer of Gaon Holdings Ltd, a publicly traded Israeli holding company traded on the TASE which focuses on three areas of operation - Cleantech / Water, Financial Services, Retail/Trading. Mr. Regev is currently also the Chief Executive Officer of Middle East Tube Company Ltd a publicly traded Israeli company traded on the TASE which focuses on steel pipe manufacturing and galvanization services. Mr. Regev was the Chief Executive Officer of Shaked Global Group Ltd, a privately-held equity investment firm that provides value added capital to environmental-related companies and technologies. Prior to joining Shaked, from 2001 to 2008, Mr. Regev was Vice President of Commercial Business at Housing & Construction Holding, or HCH, Israel’s largest infrastructure company. His duties included being responsible for the consolidation and financial recovery of various business units within HCH. Prior to that, Mr. Regev carried several roles within the group including as a Chief Financial Officer and later the Chief Executive Officer of Blue-Green Ltd., the environmental services subsidiary of HCH. Between 1999 and 2001, Mr. Regev was a manager at Deloitte & Touche, Israel. Mr. Regev holds an LLB degree in Law (Israel), is a licensed attorney and has been a licensed CPA since 1999. Mr. Regev is also a director of The Green Way Ltd, Shtang Construction and Engineering Ltd, R.I.B.E. Consulting & Investment Ltd., Middle East Tube Company Ltd, Middle East Tube - Industries 2001 Ltd, Middle East Tubes - Galvanizing (1994) Ltd, I-Solar Greentech Ltd, Plassim Infrastructure Ltd, Plassim Advanced Solutions in Sanitation Ltd, Hakohav Valves Industries Metal (1987) Ltd, Metzerplas Agriculture Cooperative Ltd, B. Gaon Retail & Trading Ltd, Gaon Agro - Rimon Management Services Ltd, B. Gaon Business (2004) Ltd, Gaon Antan Investments Ltd, Or Asaf Investments Ltd, Hamashbir Holdings (1999) Ltd, and AHAVA Holdings  LTD. Mr. Regev’s qualifications to serve on OphthaliX’s board of directors include his managerial, accounting and financial experience and his service on the boards of companies including on the board of Can-Fite.

 

Roger Kornberg, Ph.D., Roger Kornberg has served on OphthaliX’s board since February 6, 2012. He co-founded Cocrystal Discovery, Inc. in 2008 and serves as its Chief Scientist. Dr. Kornberg has been a Professor, Department of Structural Biology and Medicine for Stanford University since 1978. From 1984 to 1992, he served as the Chair of the Department of Structural Biology at Stanford and Professor of Harvard Medical School. He serves as the Chairman of Scientific Advisory Board at Cocrystal Discovery, Inc. He serves as a Member of the Board of Directors at Cocrystal Discovery, Inc. He has been a Director of Protalix BioTherapeutics, Inc. since February 7, 2008 and Teva Pharmaceutical Industries Ltd. since July 17, 2007. He serves as a Member of Scientific Advisory Board at Pacific Biosciences, Inc. (alternately Pacific Biosciences of California, Inc.). He has been a Member of Scientific Advisory Board at Epiphany Biosciences, Inc. since February 15, 2007. He serves as a Member of Scientific Advisory Board at SuperGen Inc. (alternately Astex Pharmaceuticals, Inc.) and BioCancell Therapeutics Ltd. He serves as a Member of Advisory Board at Deloitte LLP and Deloitte & Touche LLP. Dr. Kornberg serves as a Member of Scientific Advisory Board at MDRNA, Inc. (alternately MDRNA Research, Inc.), a subsidiary of Nastech Pharmaceutical Company Inc. (alternately Marina Biotech, Inc.). He is a Member of the U.S. National Academy of Sciences, an honorary member of other academies and professional societies in the United States, Europe, and Japan and a fellow of the American Academy of Arts and Sciences. He is an author of over 200 published papers. He was awarded the 2006 Nobel Prize in Chemistry for his seminal studies of the molecular basis of eukaryotic transcription, the biological process by which genetic information from DNA is copied to RNA. His Nobel Prize-winning work included discovery of Mediator, a protein complex required to facilitate gene transcription, as well as the solution of the three-dimensional crystal structure of RNA polymerase II, the most complex protein structure solved to date. In addition to the Nobel Prize, Dr. Kornberg has been honored for his work with the Eli Lilly Award, the Passano Award, the Ciba-Drew Award, the Gairdner International Award (shared with R. Roeder), the Hoppe-Seyler Lecture Award, the Harvey Prize from the Technion (Israel Institute of Technology), the ASBMB-Merck Award, the Welch Prize in 2001, the Pasarow Award in Cancer Research, the Le Grand Prix Charles-Leopold Mayer in 2002 and the 2005 Alfred P. Sloan Jr. Prize. He is a recipient of honorary degrees from universities in Europe and Israel, including the Hebrew University, where he is a Visiting Professor. Dr. Kornberg received a BA Degree from Harvard in 1967 and a Ph.D. in Chemistry from Stanford University in 1972 and did his postdoctoral studies with Aaron Klug and Francis Crick at the Medical Research Council (MRC) Laboratory of Molecular Biology in Cambridge (UK) where he discovered the Nucleosome. Dr. Kornberg’s qualifications to serve on OphthaliX’s board of directors include his expertise in chemistry and medicine, his service on the boards of biotech and pharmaceutical companies, and his experience in the academic arena.

 

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Michael Belkin, Ph.D. Michael Belkin has served on OphthaliX’s board since July 1, 2013. Dr. Belkin is, and has been since 1980, a Professor, and since 2010, a Professor Emeritus, of Ophthalmology at Tel Aviv University in Tel Aviv, Israel, and the Director of the Ophthalmic Technologies Laboratory at the university’s Eye Research Institute at the Sheba Medical Center since 1997. Since 2006, Dr. Belkin has also served as Senior Consultant of the Eye Research Institute at the Singapore National Eye Institute. He was awarded a master’s degree in natural sciences by Cambridge University, England, and received a doctorate in medicine from the Hebrew University of Jerusalem. Dr. Belkin previously served as Director of Research, Development and Non-Conventional Warfare Medicine in the Israel Defense Forces Medical Corps. He was also the first full-time Director of the Tel Aviv University Eye Research Institute, Chairman of the Tel-Aviv University Department of Ophthalmology and the President of the Israel Society of Eye and Vision Research, of which he was one of the founders. Dr. Belkin is an author of over 250 scientific publications and 20 patents. He is an internationally recognized eye researcher and has received various research awards. His laboratory is dedicated to enabling the transfer of technologies from university-level research to clinical practice by providing expertise and facilities for laboratory, preclinical and clinical studies. He is an entrepreneur and advisor of several ophthalmic companies in the fields of lasers, optics, ophthalmic devices, pharmaceutics and biotechnology. One of his ideas, the ExPRESS miniature glaucoma shunt, is currently used worldwide. Dr. Belkin is an active, long-standing member of the Association for Research in Vision and Ophthalmology (ARVO), the American Academy of Ophthalmology, the American Glaucoma Society and many others. He serves as chairman and member of various international and local scientific and professional committees as well as scientific journals’ editorial boards. Dr. Belkin’s qualifications to serve on OphthaliX’s board of directors include his expertise in ophthalmic medical research, his medical experience, and his experience as an advisor to several ophthalmic companies.

 

Election of Directors

 

Directors are elected to hold office until such director’s successor is elected and qualified or until such director’s earlier resignation or removal.  Annual meetings of the stockholders, for the election of directors to succeed those whose terms expire, are to be held at such time each year as designated by the Board of Directors, 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.

 

There are no family relationships between any director, executive officer, or person nominated or chosen by OphthaliX to become a director.

 

Legal Proceedings

 

During the past ten years, 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 OphthaliX’s directors or executive officers. 

 

OphthaliX is not aware of any legal proceedings in which any of its directors, officers or affiliates, any owner of record or beneficially of more than five percent of any class of OphthaliX’s voting securities, or any associate of any such director, officer, or affiliate of our company, or security holder is a party adverse to OphthaliX or its subsidiary or has a material interest adverse to OphthaliX or its subsidiary.

 

Code of Ethics

 

OphthaliX has not adopted a code of ethics that applies to its officers, directors and employees.

 

Director Independence

 

OphthaliX’s securities are not listed on a national securities exchange or in an inter-dealer quotation system which has requirements that directors be independent.  Therefore, OphthaliX has adopted the independence standards of the NASDAQ to determine the independence of its 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.  OphthaliX’s board of directors has determined that Roger Kornberg and Michael Belkin meet this standard, and therefore, would be considered to be independent.

 

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Meetings and Committees of the Board of Directors

 

During 2016, the Board of Directors held eight meetings.  All of OphthaliX’s directors attended at least 75% of the total number of meetings of the board of directors and committees (if any) on which they served that were held during 2016.  

 

Other than a Special Committee originally formed in connection with OphthaliX’s proposed dissolution, OphthaliX currently has no committees organized.  Because of its small size, the OphthaliX board carries out the duties of the committees. In selecting nominees for directorships, the OphthaliX board considers a broad range of characteristics related to qualifications, background and diversity of nominees based on OphthaliX’s current business needs.  The OphthaliX 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 OphthaliX’s board of directors.

 

Board Leadership Structure and Role in Risk Oversight

 

In accordance with its Bylaws, the OphthaliX board elects its officers, including its Chief Executive Officer, Chief Financial Officer, and such other officers as the board may appoint from time to time.   Dr. Pnina Fishman currently serves as OphthaliX’s Chairman and Chief Executive Officer.  The OphthaliX board periodically considers whether changes to OphthaliX’s overall leadership structure are appropriate.

 

OphthaliX’s Chairman is responsible for chairing meetings of the board.  OphthaliX’s Bylaws provide that if OphthaliX’s Chairman is unable to preside at meetings of the board, OphthaliX’s Chief Executive Officer, if such officer is a director, shall preside at such meetings.  OphthaliX’s Chairman is also responsible for chairing meetings of shareholders.  In her absence, the Board may appoint another party to chair the shareholders’ meeting.

 

Risk is inherent with every business, and how well a business manages risk can ultimately determine its success.  OphthaliX faces 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 OphthaliX’s board of directors, as a whole, has responsibility for the oversight of risk management.  In its risk oversight role, OphthaliX’s board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.

 

The OphthaliX board believes that full and open communication between management and the Board is essential for effective risk management and oversight.   Senior management attends board meetings and is available to address any questions or concerns raised by OphthaliX’s board of directors on risk management-related and any other matters.  

 

Communications by Stockholders with Directors

 

OphthaliX encourages stockholder communications to OphthaliX’s board of directors and/or individual directors.  Stockholders who wish to communicate with OphthaliX’s board of directors or an individual director should send their communications to the care of Secretary, OphthaliX Inc., 10 Bareket Street, Petach Tikva, Israel, 4951778.  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

 

OphthaliX will make every effort to schedule its 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 its annual meeting of stockholders, there is no formal policy as to their attendance at annual meetings of stockholders.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

Section 16(a) of the Exchange Act requires OphthaliX’s directors, executive officers and persons who own more than 10% of OphthaliX’s common stock to file with the SEC reports of ownership and changes in ownership of OphthaliX’s common stock. OphthaliX’s directors, executive officers and greater than 10% beneficial owners of OphthaliX’s common stock are required by SEC regulation to furnish OphthaliX with copies of all Section 16(a) reports they file. Based solely upon information furnished to OphthaliX and contained in reports filed with the SEC, OphthaliX believes that all Section 16(a) reports of its directors, executive officers and greater than 10% beneficial owners were filed timely for the fiscal year ended December 31, 2016.

 

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OphthaliX 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 OphthaliX for the years ended December 31, 2016 and 2015.

 

Name And Position   Year     Salary
($) (1)
    Bonus 
($)
    Stock
Awards
($)
    Option
Awards
($)
    All Other Compensation ($)     Total
($)
 
Pnina Fishman, Ph.D. (2)     2016                                      
Chairman and Chief Executive Officer     2015                                      
                                                         
Itay Weinstein (3)     2016       18,000                         258       18,258  
Chief Financial Officer     2015       18,000                         2,209       20,209  

  

(1) Amounts shown represent consulting fees earned or paid during the fiscal year.

 

(2) Dr. Fishman has served as OphthaliX’s Chief Executive Officer since June 2, 2014. As Chief Executive Officer of Can-Fite, OphthaliX’s majority shareholder and parent, Dr. Fishman is compensated by Can-Fite, for her services to OphthaliX as Chairman of the Board and Chief Executive Officer.

 

(3) OphthaliX paid Mr. Weinstein $18,000 in each of 2016 and 2015 for his services as OphthaliX’s Chief Financial Officer. Mr. Weinstein is also the controller of Can-Fite, OphthaliX’s majority shareholder and parent, and is compensated by Can-Fite for services provided to Can-Fite.

 

Executive Employment Agreements

 

OphthaliX has not entered into any employment agreements with OphthaliX’s named executive officers listed in the table above.

 

Outstanding Equity Awards at Fiscal Year-End

 

The following table provides information regarding all outstanding equity awards for OphthaliX’s named executive officers as of December 31, 2016:

 

    Option Awards
    Number of     Number of            
    Securities     Securities            
    Underlying     Underlying            
    Unexercised     Unexercised            
    Options     Options     Option     Option
    (#)     (#)     Exercise Price     Expiration
Name   Exercisable     Unexercisable     ($)     Date
                             
Itay Weinstein (1)     13,056       -       9.00     5/29/23

 

(1) These options were granted on May 9, 2013 and vest 50% upon grant and 50% on a quarterly basis over a three year period.

 

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Compensation of Directors

 

The following table provides information regarding the total compensation that we paid or awarded to OphthaliX’s non-executive directors during the year ended December 31, 2016.

 

Name   Fees Earned
or Paid
in Cash
    Stock
Awards
    Option
Awards
    Nonqualified
Deferred
Compensation
Earnings
    All Other
Compensation
    Total  
    ($)     ($)     ($)(1)     ($)     ($)     ($)  
Ilan Cohn, Ph.D.(2)     -                 -       -                 -                 -       -  
Guy Regev     -       -       -       -       -       -  
Roger Kornberg, Ph.D.(3)     6,750       -       -       -       -       6,750  
Michael Belkin, Ph.D.(3), (4)     7,550       -       20,083       -       -       27,633  

 

(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. Amounts reported do not reflect amounts actually received by the director.
   
(2) Reinhold Cohn and Partners, an Israeli partnership, of which Ilan Cohn, Ph.D. is a partner provides intellectual property legal services to OphthaliX in the ordinary course of business.

 

(3) In connection with the appointments of Drs. Kornberg and Belkin, OphthaliX entered into agreements to pay director fees for attendance at board meetings or any committee of the board. Drs. Kornberg and Belkin will each receive $2,000 for attendance in person at a meeting of the Board, $750 for attendance by telephone at a meeting of the board, and $750 for attendance at each meeting of any committee of the board.

 

(4) On July 1, 2013, OphthaliX granted to Dr. Belkin ten-year options to purchase 52,222 shares of 10 Bareket Street, Petach Tikva, Israel, 4951778, common stock at $6.63 per share. The options are fully vested.

 

Vote Required for Approval

 

The affirmative vote of a plurality of the votes cast at the annual meeting is required for the election of each of the five director nominees, assuming a quorum is present. Stockholders do not have the right to cumulate their votes for directors. Adoption of the Election of Directors Proposal is conditioned upon the approval of the Authorized Share Increase Proposal and Name Change Proposal.

 

Recommendation of Board of Directors

 

After careful consideration, OphthaliX’s Board of Directors has unanimously adopted resolutions approving, and recommending to its stockholders to vote “For” each of the director nominees named above.

 

THE OPHTHALIX BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OPHTHALIX STOCKHOLDERS VOTE “FOR” THE ELECTION OF DIRECTORS PROPOSAL.

  

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PROPOSAL 4 — THE SAY ON PAY PROPOSAL

 

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and Section 14A of the Exchange Act, OphthaliX’s stockholders are entitled to vote to approve, on an advisory basis, the compensation of OphthaliX’s named executive officers as disclosed in this proxy statement/prospectus in accordance with SEC rules.

 

This vote is not intended to address any specific item of compensation, but rather the overall compensation of OphthaliX’s named executive officers in this proxy statement/prospectus. The compensation of OphthaliX’s named executive officers subject to the vote is disclosed in the compensation tables and the related narrative disclosure contained in this proxy statement/prospectus.

 

Accordingly, the board of directors is asking the stockholders to indicate their support for the compensation of OphthaliX’s named executive officers as described in this proxy statement/prospectus by casting a non-binding advisory vote “FOR” the following resolution:

 

“RESOLVED, that the compensation paid to OphthaliX’s named executive officers, as disclosed pursuant to compensation disclosure rules of the SEC, including the compensation tables and any related information disclosed in this proxy statement/prospectus is hereby APPROVED.”

 

Because the vote is advisory, it is not binding on the board of directors of OphthaliX.

 

Vote Required for Approval

 

Approval of the Say on Pay Proposal requires the affirmative vote of a majority of the votes cast for or against the proposal at the OphthaliX annual meeting, assuming a quorum is present. Adoption of the Say on Pay Proposal is not conditioned upon the approval of any of the other proposals.

 

Recommendation of the OphthaliX Board of Directors

 

THE OPHTHALIX BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OPHTHALIX STOCKHOLDERS VOTE “FOR” THE SAY ON PAY PROPOSAL.

 

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PROPOSAL 5 — THE SAY ON FREQUENCY PROPOSAL

 

The Dodd-Frank Act, and Section 14A of the Exchange Act enable OphthaliX’s stockholders, at least once every six years, to indicate their preference regarding how frequently OphthaliX should solicit a non-binding advisory vote on the compensation of OphthaliX’s named executive officers as disclosed in its proxy statement. Accordingly, OphthaliX is asking stockholders to indicate whether they would prefer an advisory vote every year, every other year or every three years. Alternatively, stockholders may abstain from casting a vote. For the reasons described below, the board of directors recommends that the stockholders select a frequency of every year.

 

After considering the benefits and consequences of each alternative, the board of directors recommends that the advisory vote on the compensation of OphthaliX’s named executive officers be submitted to the stockholders once every year.

 

The board has determined that an advisory vote on executive compensation every year is the best approach for OphthaliX. In formulating its recommendation, the board considered that an annual advisory vote on executive compensation will allow stockholders to provide direct input on OphthaliX’s policies and practices every year.

 

Accordingly, the board of directors is asking stockholders to indicate their preferred voting frequency of soliciting advisory stockholder approval of compensation of OphthaliX’s named executive officers once every one, two or three calendar years.

 

While the board of directors believes that its recommendation is appropriate at this time, the stockholders are not voting to approve or disapprove that recommendation, but are instead asked to indicate their preferences, on an advisory basis, as to whether the non-binding advisory vote on the approval of OphthaliX’s executive officer compensation practices should be held every year, every other year or every three years. The option among those choices that receives the highest number of votes from the holders of shares present in person or represented by proxy and entitled to vote at the annual meeting will be deemed to be the frequency preferred by the stockholders.

 

The board of directors value the opinions of the stockholders in this matter, and the board intends to hold advisory stockholder votes on the compensation of OphthaliX’s named executive officers in the future in accordance with the alternative that receives the most stockholder support, even if that alternative does not receive the support of a majority of the votes cast. However, because this vote is advisory and therefore not binding on the board of directors or OphthaliX, the board may decide that it is in the best interests of the stockholders that OphthaliX hold an advisory vote on executive compensation more or less frequently than the option preferred by the stockholders. The vote will not be construed to create or imply any change or addition to the fiduciary duties of OphthaliX or the board of directors.

 

Recommendation of the OphthaliX Board of Directors

 

THE OPHTHALIX BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OPHTHALIX STOCKHOLDERS VOTE “FOR” THE ONE YEAR ALTERNATIVE WITH RESPECT TO THE SAY ON FREQUENCY PROPOSAL.

 

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PROPOSAL 6 — AUDITOR RATIFICATION PROPOSAL

 

OphthaliX’s board has selected Kost Forer Gabbay & Kasierer, a member of Ernst & Young Global (“EY”) as OphthaliX’s independent registered public accounting firm for the year ending December 31, 2017 and has further directed that management submit the selection of OphthaliX’s independent registered public accounting firm for ratification by the stockholders at the annual meeting.

 

Ratification of the selection of EY as OphthaliX’s independent registered public accounting firm is not required by OphthaliX’s bylaws or other applicable legal requirements. However, OphthaliX’s board of directors is submitting the selection of EY to the stockholders for ratification as a matter of good corporate practice. If OphthaliX’s stockholders fail to ratify the selection, the Audit Committee will reconsider whether or not to retain that firm. Even if the selection is ratified, the Audit Committee at its discretion may direct the selection of a different independent registered public accounting firm at any time during the year if it determines that such a change would be in OphthaliX’s best interests and the best interests of OphthaliX’s stockholders.

 

Audit Fee

 

The aggregate fees billed for each of the last two fiscal years for professional services rendered by EY for the audits of OphthaliX’s annual financial statements and reviews of financial statements included in OphthaliX’s10-Q reports and services normally provided by the accountant in connection with statutory and regulatory filings or engagements were $61,000 for the years ended 2016 and 2015.

 

Tax Fees

 

The aggregate fees billed in each of the last two fiscal years for professional services rendered by EY for tax compliance, tax advice, and tax planning were $4,000 for years ended 2016 and 2015.

 

All Other Fees

 

The aggregate fees billed in each of the last two fiscal years for products and services provided by EY, other than the services reported above, were $21,000 for fiscal year ended 2016 and $35,000 for fiscal year ended 2015.

 

OphthaliX does not have an audit committee currently serving and as a result OphthaliX’s board of directors performs the duties of an audit committee.  OphthaliX’s board of directors will evaluate and approve in advance, the scope and cost of the engagement of an auditor before the auditor renders audit and non-audit services.  OphthaliX does not rely on pre-approval policies and procedures.

 

Vote Required for Approval

 

Approval of the Ratification of Auditor Proposal requires the affirmative vote of a majority of the votes cast for or against the proposal at the OphthaliX annual meeting, assuming a quorum is present. Ratification of Auditor Proposal is not conditioned upon the approval of any of the other proposals.

 

Recommendation of the OphthaliX Board of Directors

 

THE OPHTHALIX BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OPHTHALIX STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF AUDITOR PROPOSAL.

 

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PROPOSAL 7 — THE ADJOURNMENT PROPOSAL

 

The Adjournment Proposal, if adopted, will allow OphthaliX’s board of directors to adjourn the annual meeting to a later date or dates, if necessary or appropriate, to permit further solicitation of proxies in the event, based on the tabulated votes, there are not sufficient votes at the time of the annual meeting to approve one or more of the proposals presented at the annual meeting. In no event will OphthaliX’s board of directors adjourn the annual meeting without further notice, to a date that is more than 30 days after the date for which the annual meeting was originally noticed or if a new record date is fixed for the adjourned meeting.

 

In the Adjournment Proposal, OphthaliX is asking its stockholders to authorize the holder of any proxy solicited by its board of directors to vote in favor of granting discretionary authority to OphthaliX’s board of directors to adjourn the annual meeting to another time and place for the purpose of soliciting additional proxies. If OphthaliX’s stockholders approve the Adjournment Proposal, OphthaliX could adjourn the annual meeting and any adjourned session of the annual meeting and use the additional time to solicit additional proxies, including the solicitation of proxies from OphthaliX stockholders who have previously voted.

 

Vote Required for Approval

 

Approval of the Adjournment Proposal requires the affirmative vote of a majority of the votes cast for or against the proposal by holders of OphthaliX common stock entitled to vote and represented in person or by proxy at the OphthaliX annual meeting, assuming a quorum is present. Adoption of the Adjournment Proposal is not conditioned upon the approval of any of the other proposals.

 

Recommendation of the OphthaliX Board of Directors

 

THE OPHTHALIX BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT OPHTHALIX STOCKHOLDERS VOTE “FOR” THE ADJOURNMENT PROPOSAL.

 

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THE MERGER

 

The following discussion contains certain information about the Merger. The discussion is subject, and qualified in its entirety by reference, to the Merger Agreement attached as Annex A to this proxy statement/prospectus. You are urged to carefully read this entire proxy statement/prospectus, including the Merger Agreement attached as Annex A, for a more complete understanding of the Merger.

 

General

 

Each of OphthaliX’s and Wize’s respective boards of directors has approved the Merger Agreement and the transactions contemplated therein, including the Merger. Pursuant to the Merger Agreement, Merger Sub, a wholly owned subsidiary of OphthaliX, will merge with and into Wize, with Wize continuing as the surviving entity and a wholly owned subsidiary of OphthaliX. Immediately prior to the Merger, OphthaliX will change its name to “Wize Pharma, Inc.”

 

Upon the consummation of the Merger, each Wize ordinary share issued and outstanding immediately prior to the Merger, other than any shares owned by Wize, will convert into the right to receive 4.1781 shares of OphthaliX common stock, subject to adjustment as set forth in the Merger Agreement. The number of shares of OphthaliX common stock to be issued in the Merger for each Wize ordinary share of Wize is fixed (except in the event of any stock dividend, subdivision, recapitalization, split, reverse, combination or exchange of shares or similar event with respect to Wize ordinary shares or OphthaliX common stock and except in the case of any certain further equity financing of Wize prior to completion of the Merger) and will not be adjusted for changes in the market price of OphthaliX common stock or changes in the market price of Wize ordinary shares.

 

The closing price of OphthaliX common stock on the OTC Pink on May 21, 2017, the last full trading day prior to the public announcement of the Merger, was $0.31. The closing price of OphthaliX common stock on the OTC Pink on September 7, 2017, the last practicable full trading day prior to the date of this proxy /prospectus, was $0.11.

 

Background of the Merger

 

 The respective boards of directors and management of OphthaliX and Wize regularly review their respective operating and strategic plans as well as potential partnerships in an effort to enhance stockholder value. This review includes, (1) in the case of OphthaliX, considering financing and mergers and acquisitions and, over the years, OphthaliX has engaged in discussions with several investment banks and potential merger targets, and (2) in the case of Wize, especially since it emerged from bankruptcy proceedings in early 2015, mostly considering or entering into financing transactions to fund its business needs.

 

On December 30, 2013, OphthaliX announced that its Phase III trial of CF101 for the treatment of DES did not meet its primary endpoint. Following a retrospective study of the Phase III trial, on June 9, 2014, OphthaliX announced that it decided to terminate development of CF101 for DES and that it is focused on the development of CF101 for the treatment of glaucoma, with a Phase II study ongoing at that time. In addition, OphthaliX announced that as part of its corporate strategy to build a specialized ophthalmic company that develops and in-licenses drugs for the treatment of ophthalmic diseases, OphthaliX was exploring opportunities to obtain technologies that will complement and expand the existing pipeline.

 

On June 18, 2015, OphthaliX entered into a Share Purchase Agreement with Improved Vision Systems (I.V.S) Ltd (“IVS”), an Israeli company, and certain other parties, pursuant to which, among other things, OphthaliX would acquire IVS. Subsequently, on August 25, 2015, the Share Purchase Agreement was amended. The Share Purchase Agreement was subject to certain closing conditions which were subsequently not met and as a result the acquisition of IVS was not completed.

 

In late 2015, management of OphthaliX met with certain members of management of Wize to discuss a potential collaboration, which at that time did not lead to any further discussions.

 

On July 5, 2016, OphthaliX announced that its Phase II trial with respect to the development of CF101 for the treatment of glaucoma or related syndromes of ocular hypertension did not meet its primary endpoint. Recognizing that in light of the failure of the Phase II glaucoma trial and the Phase III DES trial, enhancing shareholder value as a stand-alone entity would be extremely challenging and uncertain, OphthaliX’s senior management therefore actively engaged in pursuing a suitable business combination transaction with the goal of enhancing shareholder value. However, OphthaliX was unable at that time to identify a suitable target.

 

On August 9, 2016, OphthaliX’s board of directors convened a special meeting to discuss the potential liquidation of OphthaliX due to the ongoing costs of maintaining OphthaliX’s existence and the then approximately $4 million of debt that OphthaliX owed to Can-Fite. At the meeting, the board of directors formed a Special Committee (the “Special Committee”), comprised of Roger Kornberg and Michael Belkin, both independent directors, to review the procedure for liquidating OphthaliX and making recommendations to the OphthaliX board of directors.

 

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On August 29, 2016, the Special Committee of OphthaliX convened a meeting to discuss the potential liquidation of OphthaliX. Ronen Kantor from Doron Tikotzky Kantor Gutman Cederboum & Co. (“DTKGC”), outside Israeli legal counsel to OphthaliX, who serves as its Secretary, presented to Mr. Kornberg and Mr. Belkin the attempts made by OphthaliX during the previous 18 months to enhance the status of OphthaliX through fundraising efforts and acquisitions of complimentary assets to merge into OphthaliX, including the failed IVS transaction. At the meeting, Mr. Kantor noted that OphthaliX was introduced to several potential merger targets. However, OphthaliX was deemed not to be an attractive merger candidate. In view of the above, the Special Committee resolved to recommend to the OphthaliX board of directors that OphthaliX be voluntarily liquidated and dissolved pursuant to a Plan of Dissolution. As part of the Plan of Dissolution, OphthaliX would (i) sell to Can-Fite all the ordinary shares of Eyefite together with 446,827 ordinary shares of Can-Fite, and (ii) in exchange for the sale, Can-Fite will waive and cancel all indebtedness owed by OphthaliX to Can-Fite and as part of the purchase of Eyefite, Can-Fite will assume certain accrued milestone payments in the amount of $175,000 under the LO2A License Agreement.

 

On September 19, 2016, OphthaliX’s board of directors approved the voluntary liquidation and dissolution of OphthaliX pursuant to the Plan of Dissolution recommended to the OphthaliX board of directors by the Special Committee. At the same meeting, OphthaliX’s board of directors nominated Pnina Fishman, Ilan Cohen, Guy Regev, Roger Kornberg and Michael Belkin for re-election until the next annual meeting of stockholders and until their successor are elected and qualified and that the re-election of directors be submitted for approval by written consent of Can-Fite, as OphthaliX’s majority shareholder.

 

On September 21, 2016, Can-Fite consented in writing to the voluntary dissolution and liquidation of OphthaliX pursuant to a Plan of Dissolution and to the re-election of the above referenced nominees. On the same day, OphthaliX filed a Preliminary Information Statement on Schedule 14C with the SEC with respect to the actions taken by written consent by Can-Fite. The Plan of Dissolution was expected to go into effect 20 days after the date a Definitive Information Statement was first mailed to all OphthaliX stockholders who did not execute the written consent.

 

On September 25, 2016, Ronen Solomon, a director of Wize at the time, contacted Mr. Kantor and proposed a meeting between the management of OphthaliX and the management of Wize to consider a transaction in lieu of the proposed liquidation of OphthaliX.

 

On September 26, 2017, Noam Danenberg, a strategic advisor of Wize and an affiliate of one of Wize’s principal shareholders (see “MANAGEMENT OF OPHTHALIX FOLLOWING THE MERGER” beginning on page 120 of this proxy statement/prospectus), contacted Pnina Fishman, Chief Executive Officer and director of OphthaliX, to inquire whether OphthaliX would be interested in a potential merger between OphthaliX and Wize. The parties agreed during the call to further consider a potential merger between the two companies and to speak again within the coming days after considering the proposal.

 

On October 9, 2016, Pnina Fishman, Motti Farbstein, Chief Financial Officer of Can-Fite, Ronen Kantor, Or Eisenberg, Chief Financial Officer and acting Chief Executive Officer of Wize, Noam Danenberg and Ronen Solomon met for an initial meeting and discussed the feasibility and possible terms and conditions of such proposed merger.

 

On October 31, 2016, a meeting of the members of the management of Wize and OphthaliX (namely, Pnina Fishman, Motti Farbstein and Ronen Kantor on behalf of OphthaliX and Or Eisenberg and Noam Danenberg on behalf of Wize) was held in which the proposed terms and conditions in relation to the merger were further discussed, including, for the first time, a proposed exchange ratio. The attendees suggested at such meeting that such exchange ratio should reflect that, immediately following the proposed transaction, Wize shareholders will own approximately 92% of the outstanding common stock of OphthaliX on a fully diluted basis while OphthaliX stockholders will own the remaining approximate 8%, to which we sometime refer below as the initial 92/8 combination ratio.

 

On November 1, 2016, Pnina Fishman sent to Noam Danenberg a first draft of a non-binding letter of intent that included the proposed initial 92/8 combination ratio described above. Between November 1, 2016 and November 9, 2016, negotiations between various representatives of the parties, including representatives of their respective outside counsels, took place and drafts of the non-binding letter of intent were exchanged between the parties.

 

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On November 10, 2016, OphthaliX’s Special Committee held a telephonic meeting at which management reported to the Special Committee on the proposed merger with Wize. At the meeting, management reported to the Special Committee on the background leading up to the proposed merger, the technology being developed by Wize and other information about Wize. Management also reported on the proposed terms and conditions of the merger and discussed how the proposed merger presented a more favorable option than dissolving OphthaliX. The Special Committee recommended to the board of directors of OphthaliX that it abandon the voluntary dissolution and liquidation of OphthaliX and that OphthaliX enter into a non-binding letter of intent with Wize with respect to the proposed merger. On the same day, OphthaliX’s board of directors authorized OphthaliX to enter into the non-binding letter of intent with Wize providing for the merger with Wize.

 

On November 14, 2016, the board of directors of Wize held a telephonic meeting at which management and representatives of Goldfarb Seligman & Co. (“Goldfarb”), outside Israeli legal counsel to Wize, provided an overview of the proposed merger with OphthaliX. At the meeting, management reported to the Wize board of directors on the background leading up to the proposed merger, and other information about OphthaliX. Management also reported on the proposed terms and conditions of the merger and discussed the reasons therefor. On the same day, the Wize board of directors authorized Wize to enter into the non-binding letter of intent with OphthaliX providing for the merger with OphthaliX. At that meeting, the Wize board also instructed management to retain the services of an independent financial advisor, to provide Wize with its opinion with respect to the fairness, from a financial point of view, of the exchange ratio in the contemplated merger.  Wize management thereafter proposed to the Wize board to engage PBB, on the basis of its qualifications, experience and reputation in providing fairness opinions to Israeli companies.

 

On November 15, 2016, members of the management of both companies together with representatives of their respective outside counsels held an organizational meeting for the merger between the two companies. At such meeting, the participants discussed the legal steps required for the implementation of the merger, due diligence items and the timelines going forward. Later that day, also on November 15, 2016, OphthaliX and Wize signed the non-binding letter of intent. The letter of intent contemplated the reverse merger between a new wholly owned Israeli subsidiary of OphthaliX and Wize, with an exchange ratio reflecting the initial 92/8 combination ratio.

 

Following the meeting, each of OphthaliX and Wize engaged in due diligence investigations of the business and financial condition of the other party, including through exchanges of documents and information based on specific requests from the other party.

 

On December 13, 2016, DTKGC delivered an initial draft of the Merger Agreement to Goldfarb, which reflected the initial 92/8 combination ratio and provided, among other things, for closing conditions around the conversion of all Convertible Loans of Wize into ordinary shares of Wize prior to the Effective Time of the Merger and the raising of equity financing by Wize prior to such time, to which is sometimes referred to below as the minimum financing conditions. Thereafter, starting December 22, 2016, the parties and their respective outside counsels began negotiating the Merger Agreement.

 

On December 25, 2016, Pnina Fishman, Motti Farbstein, Or Eisenberg and Noam Danenberg met to discuss the key open commercial issues raised by the initial draft Merger Agreement, primarily with respect to the minimum financing conditions.

 

Subsequently, between December 2016 and May 2017, the parties continued to discuss and exchange revised drafts of the Merger Agreement as well as of ancillary documents thereto, including the Voting and Undertaking Agreement. Negotiations centered around the transaction structure, the exchange ratio, the minimum financing conditions, interim covenants, the treatment and effects of Wize’s convertible securities , the other closing conditions and the scope of indemnity to be provided by Can-Fite under the Voting and Undertaking Agreement. In particular, the parties and their respective outside counsel discussed the minimum financing conditions and proposed exchange ratio, initially reflecting the initial 92/8 combination ratio, and the possible effect thereon, if any, of the Convertible Loans if they are converted following the transaction or if Wize were to raise additional funds through equity financings.

 

On February 15, 2017, the board of directors of Wize convened a meeting at which the key terms of the proposed merger were discussed. Management presented the key business and financial reasons for the Merger. A representative of Goldfarb provided an overview to the board of the key legal terms of the transaction documents, including the road map required in order to complete the transaction, and reviewed, among other things, the fiduciary duties of the directors in the context of the proposed transaction.

 

On March 12, 2017, an all parties conference call was held in which members of the management of Wize and OphthaliX as well as representatives of DTKGC and Goldfarb participated in an attempt to discuss and resolve the remaining key outstanding issues. In particular, the parties discussed and agreed in principle that, subject to the approval of their respective boards of directors, (1) the exchange ratio will reflect that pre-transaction Wize shareholders will receive approximately 90% of the shares of OphthaliX on a fully diluted basis with the remaining 10% to be held by existing shareholders and that such exchange ratio will not be adjusted as a result of conversion of Wize existing Convertible Loans and (2) that, as a closing condition, Wize will have a minimum amount of cash to fund its operations.

 

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On March 21, 2017, the board of directors of OphthaliX convened a meeting. At the meeting, management of OphthaliX updated the directors on the progress made in the negotiations with Wize.

 

On April 26, 2017, the board of directors of Wize convened a meeting at which the key terms of the merger documents and the associated risks and potential merits to Wize and its shareholders in connection with the merger were discussed. Management presented the key business and financial reasons for the merger. A representative of PBB reviewed its financial analysis of OphthaliX and Wize and the potential transaction, including its preliminary report regarding the fairness, from a financial point of view, of the proposed exchange ratio to Wize shareholders. A representative of Goldfarb summarized to the board the various key legal terms of the transaction documents, including the exchange ratio, interim covenants and closing conditions, key due diligence findings and the road map required in order to complete the transaction. After consideration and discussion of the matters presented, the board of directors instructed management to progress with the finalization of the merger documents, but to seek to obtain the written consents of Rimon Gold Assets Ltd. (“Rimon Gold”) and Ridge, holders of Convertible Loans, to the transaction prior to execution of the merger agreement. For a description of such consents, see “INFORMATION ABOUT WIZE — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 of this proxy/prospectus.

 

On April 29, 2017, OphthaliX’s Special Committee convened a meeting at which the terms of the final merger documents and the associated risks and potential merits to OphthaliX and its stockholders in connection with the Merger were discussed. After consideration and discussion of the matters presented, the Special Committee unanimously recommended that the board of directors approve the Merger Agreement. On the same day, OphthaliX’s board of directors convened a meeting. A representative of DTKGC summarized to the board the various closing conditions and the road map required in order to complete the transaction and further discussed the sale of Eyefite to Can-Fite in exchange for the waiver and cancellation of the debt owed by OphthaliX to Can-Fite. After consideration and discussion of the matters presented, the board of directors unanimously approved the entry into the Merger Agreement.

 

On May 11, 2017 and May 19, 2017, Wize obtained the written consents it sought from Ridge and Rimon Gold, respectively.

 

On May 21, 2017, the board of directors of Wize convened a telephonic meeting at which the terms of the final merger documents and the associated risks and potential merits to Wize and its shareholders in connection with the merger were discussed and reviewed again. A representative of PBB reviewed again its financial analysis of OphthaliX and Wize and the potential transaction and, following discussion, delivered an oral opinion, which was subsequently confirmed in writing, regarding the fairness, from a financial point of view, of the proposed exchange ratio to Wize shareholders. A representative of Goldfarb summarized to the board the final key terms of the merger documents, including the terms of the written consents to the Merger obtained from Rimon Gold and Ridge prior to such meeting. After consideration and discussion of the matters presented, the board of directors of Wize approved the entry into the Merger Agreement and the related merger documents.

 

On May 21, 2017, the Merger Agreement was executed by OphthaliX, Merger Sub and Wize. Simultaneously with the execution of the Merger Agreement, the Voting and Undertaking Agreement was executed by OphthaliX, Can-Fite and Wize. For a discussion of the Merger Agreement and other transaction documents, see the sections titled “THE MERGER AGREEMENT” beginning on page 73 of this proxy statement/prospectus and “AGREEMENTS RELATING TO THE MERGER AGREEMENT” beginning on page 84 of this proxy/prospectus.

 

On May 22, 2017, OphthaliX and Wize each announced the entry into the Merger Agreement in separate filings with the SEC and ISA, respectively.

 

OphthaliX’s Reasons for the Merger

 

In approving and authorizing the Merger Agreement and the Merger, the OphthaliX board of directors considered a number of factors. Although the following discussion sets forth the material factors considered by the OphthaliX board of directors in reaching its determination, it may not include all of the factors considered by the OphthaliX board of directors. In light of the number and wide variety of factors considered in connection with its evaluation of the Merger Agreement and the Merger, the OphthaliX board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its determination. The OphthaliX board of directors viewed its position and determinations as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors.

 

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In evaluating the Merger Agreement and the Merger, the OphthaliX board of directors consulted with OphthaliX’s management and legal advisors and considered a number of factors, some of which were viewed as potentially beneficial aspects of the Merger including, among others, the following:

 

OphthaliX’s failure to meet the primary endpoints in its Phase II glaucoma trial and in a Phase III dry eye syndrome trial;

 

OphthaliX’s likely inability to raise significant additional capital within a reasonable period of time under circumstances that would fund further clinical development of CF101 for ophthalmic indications or for the in-licensing of any other technology that could enhance stockholder value;

 

the adoption of the plan to dissolve OphthaliX, a process which was halted as a result of entry into a non-binding letter of intent with Wize;

 

OphthaliX’s current financial position, including its lack of any revenue producing operations, its current liabilities prior to the sale of Eyefite to Can-Fite (including deferred payments of approximately $4.8 million that was owed by OphthaliX and Eyefite to Can-Fite);

 

OphthaliX’s previous efforts to develop strategic alternatives, including the proposed acquisition of IVS that was not completed and the current lack of other viable strategic alternatives;

 

subject to completion of the Merger, the cancellation of all indebtedness that was owed by OphthaliX and Eyefite to Can-Fite, including cancellation of deferred payments of approximately $4.8 million;

 

the number of shares of OphthaliX common stock to be issued to Wize shareholders pursuant to the Merger Agreement and the fact that, following the completion of the Merger, OphthaliX stockholders would have the opportunity to participate in the potential long-term value of Wize’s development of LO2A as a result of the Merger;

 

the judgment, advice and analysis of OphthaliX’s management and advisors with respect to the potential benefits of the Merger, based in part on the business, technical, financial due diligence investigations performed with respect to Wize;

 

Wize’s status as a publicly traded company whose shares are traded in Israel on the TASE;

 

historical and current information concerning OphthaliX’s business, including its financial performance and condition;

 

the general economic and market conditions, as they relate to Wize’s ability to raise additional capital from new investors for the continued growth of Wize’s business;

 

the current conditions in the pharmaceutical and biotechnology marketplace and the positioning of Wize within that market after the Merger;

 

the terms of the Merger Agreement and the other transactions contemplated thereby, including the exchange ratio, the parties’ representations, warranties and covenants and the conditions to their respective obligations;

 

the risks and uncertainties associated with the proposed Merger; and

 

the likelihood that the Merger will be consummated on a timely basis, the possibility that OphthaliX would be able to take advantage of the potential benefits resulting from the combination of the OphthaliX public company infrastructure and Wize management team and board and business know-how.

 

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The OphthaliX board of directors also carefully considered and discussed a number of risks, uncertainties, and other countervailing factors in its deliberations regarding entering into the Merger Agreement and consummating the Merger, including, among others, the following:

 

the risk that the conditions to the Merger will not be satisfied;

 

the risks and substantial costs, including public company costs, and the difficulty of obtaining additional financing on terms favorable to OphthaliX or at all to cover such costs of OphthaliX remaining a stand-alone publicly traded company whose shares are traded on the OTC, instead of agreeing to a transaction with Wize;

 

the risk of not obtaining a fairness opinion from a financial advisor with respect to the Merger;

 

the possibility that the anticipated benefits of the Merger may not be realized or may be lower than expected;

 

the substantial fees and expenses incurred by OphthaliX in connection with the Merger, which will be incurred whether or not the Merger is completed;

 

the risk that the Merger might not be consummated in a timely manner or at all and the potential adverse effect of the public announcement of the Merger or on the delay or failure to complete the Merger on the reputation of OphthaliX; and

 

other risks and uncertainties described in the sections entitled “Risk Factors” and “CAUTIONARY STATEMENT REGARDING Forward-Looking Statements” beginning on page 13 and 40, respectively, of this proxy statement/prospectus.

 

The OphthaliX board of directors believes that, overall, the potential benefits to OphthaliX stockholders of the Merger Agreement, the Merger and the other transactions contemplated thereby outweigh the risks and uncertainties.

 

Wize’s Reasons for the Merger

 

In approving and authorizing the Merger Agreement and the Merger, the Wize board of directors considered a number of factors. Although the following discussion sets forth the material factors considered by the Wize board of directors in reaching its determination, it may not include all of the factors considered by the Wize board of directors. In light of the number and wide variety of factors considered in connection with its evaluation of the Merger Agreement and the Merger, the Wize board of directors did not consider it practicable to, and did not attempt to, quantify or otherwise assign relative weights to the specific factors it considered in reaching its determination. The Wize board of directors viewed its position and determinations as being based on all of the information available and the factors presented to and considered by it. In addition, individual directors may have given different weight to different factors.

 

In evaluating the Merger Agreement and the Merger, the Wize board of directors consulted with Wize’s management and its financial and legal advisors, reviewed a significant amount of information, and considered a number of factors, including, among others, the following:

 

the judgment, advice and analysis of Wize’s management and advisors with respect to the potential benefits of the Merger, including OphthaliX’s financial condition, based in part on the business, technical, financial due diligence investigations performed with respect to OphthaliX;

 

OphthaliX’s status as a publicly traded company whose shares are traded in the United States on the OTC;

 

historical and current information concerning Wize’s business, including its financial performance and condition, and Wize’s prospects if it was to remain a publicly traded company whose shares are traded solely on the TASE, including its need to obtain significant additional financing;

 

the current conditions in the pharmaceutical and biotechnology marketplace and the positioning of Wize within that market after the Merger;

 

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the terms and conditions of the Merger Agreement and the other transactions contemplated thereby, including the exchange ratio, the parties’ representations, warranties and covenants and the conditions to their respective obligations;

 

certain tax consequences of the Merger as more fully described in the sections entitled “—U.S. Federal Income Tax Considerations” and “—Material Israeli Tax Considerations” beginning on page 138 and 142, respectively, of this proxy statement/prospectus; and

 

the risks and uncertainties associated with the proposed Merger.

 

In reaching its determination to approve the Merger Agreement and the Merger, the Wize board of directors identified and considered a number of the potentially beneficial aspects of the Merger, including the following:

 

the range of options available to the post-Merger combined organization to access the public and private equity markets, primarily in the United States. In particular, the belief that the Merger will allow increased access to sources of capital and a broader range of investors to support the clinical trials and development of LO2A than it could otherwise obtain if it continued to operate as a publicly traded company whose shares are traded on the TASE;

 

the general economic and market conditions, as they relate to Wize’s ability to raise additional capital from new investors for the continued growth of its business, the potential prospects for the post-Merger combined company to raise additional capital, and the potential stock market performance of Wize as a publicly traded company;

 

the cash resources of the combined organization expected to be available at the closing of the Merger;

 

subject to completion of the Merger, the cancellation of all indebtedness that was owed by OphthaliX and Eyefite to Can-Fite, including cancellation of deferred payments of approximately $4.8 million;

 

that, according to the Merger Agreement, at the Effective Time of the Merger, OphthaliX will have no liabilities but will continue to hold shares of Can-Fite;

 

the number of shares of OphthaliX common stock to be issued to Wize shareholders pursuant to the Merger Agreement;

 

the fairness opinion of PBB to the Wize board of directors (as more fully described below under “—Opinion of Wize’s Financial Advisor”);

 

the fact that shares of OphthaliX common stock to be issued to Wize shareholders will be registered pursuant to a Form S-4 registration statement by OphthaliX and will become freely tradable for Wize shareholders who are not affiliates of Wize;

 

historical and current financial market conditions;

 

OphthaliX’s and Wize’s historical stock prices and trading volumes;

 

the likelihood that the Merger will be consummated on a timely basis;

 

the terms and conditions of the Merger Agreement, including, without limitation, (1) the determination that an exchange ratio that is fixed and not subject to adjustment based on trading prices is appropriate to reflect the expected relative percentage ownership of the Wize and OphthaliX securityholders, (2) the limited number and nature of the conditions of the obligation of OphthaliX to consummate the Merger and the limited risk of non-satisfaction of such conditions, and (3) the indemnity undertaking to be provided at closing by Can-Fite pursuant to the Voting and Undertaking Agreement; and

 

the share ownership structure of, and existing and potential investors in, the post-Merger combined company, including the fact that Can-Fite is expected to beneficially own approximately 8% of the issued and outstanding shares of the post-Merger combined company.

 

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The Wize board of directors also carefully considered and discussed a number of risks, uncertainties, and other countervailing factors in its deliberations regarding entering into the Merger Agreement and consummating the Merger, including, among others, the following:

 

the risk that the conditions to the Merger, including the required shareholder approval by a special majority, will not be satisfied;

 

the risks and substantial costs, including public company costs, associated with being traded on the OTC;

 

the uncertainty of the trading price of OphthaliX common stock after announcing the Merger and after closing the Merger;

 

the possibility that the anticipated benefits of the Merger may not be realized or may be lower than expected;

 

the substantial fees and expenses incurred by Wize in connection with the Merger, which will be incurred whether or not the Merger is completed;

 

the risk that the Merger might not be consummated in a timely manner or at all and the potential adverse effect of the public announcement of the Merger or on the delay or failure to complete the Merger on the reputation of Wize; and

 

various other risks and uncertainties described in the sections entitled “Risk Factors” and “CAUTIONARY STATEMENT REGARDING Forward-Looking Statements” beginning on page 13 and 40, respectively, of this proxy statement/prospectus.

 

The Wize board of directors believes that, overall, the potential benefits to Wize shareholders of the Merger Agreement, the Merger and the other transactions contemplated thereby outweigh the risks and uncertainties.

 

Opinion of Wize’s Financial Advisor

 

The Wize board of directors retained PBB (formerly known as De-Kalo Ben-Yehuda & Co. Ltd.) on March 2, 2017 to evaluate the fairness, from a financial point of view, of the merger consideration to be paid by OphthaliX to the holders of ordinary shares of Wize in the Merger pursuant to the Merger Agreement, which, prior to the adjustment thereof described elsewhere in this proxy statement/prospectus, was 5.3681 shares of OphthaliX common stock per each one ordinary share of Wize (the “Initial Exchange Ratio”).

 

On May 21, 2017, PBB rendered its oral opinion to the Wize board of directors (which was subsequently confirmed in writing by delivery of PBB’s written opinion, dated as of June 20, 2017) to the effect that, based upon and subject to the assumptions, factors, qualifications and limitations set forth in the written opinion described herein, as of May 21, 2017 (the “Valuation Date”), the Initial Exchange Ratio in the Merger was fair, from a financial point of view, to the holders of ordinary shares of Wize.

 

PBB’s opinion was prepared solely for the information of the Wize board of directors and only addressed the fairness, from a financial point of view, to Wize shareholders of the Initial Exchange Ratio. PBB was not requested to opine as to, and PBB’s opinion does not address, the relative merits of the Merger or any alternatives to the Merger, Wize’s underlying decision to proceed with or effect the Merger, or any other aspect of the Merger.

 

The following summary of PBB’s opinion is qualified in its entirety by reference to the full text of its written opinion and analysis, an unofficial translation of which from Hebrew is included as Annex C to this prospectus/proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken, valuation analysis made and other matters considered by PBB in preparing its opinion. Neither PBB’s written opinion nor the summary of its opinion and the related analyses set forth therein or in this proxy statement/prospectus are intended to be, and they do not constitute, advice or a recommendation to any shareholder as to how such shareholder should act or vote with respect to any matter relating to the Merger or any other matter.

 

Qualifications and Assumptions: In arriving at its opinion, PBB reviewed certain publicly available financial and other information concerning OphthaliX and Wize, including their respective financial statements for the year ended December 31, 2016, and the proposed Merger. In preparing the opinion, PBB, with the consent of Wize, made various qualifications and assumptions, including, without limitation, that (1) PBB did not assume responsibility for the independent verification of, and did not independently verify, any information, whether publicly available or furnished to it, concerning OphthaliX and Wize, and (2) its opinion relies on many economic parameters and nothing therein should be construed as expressing a recommendation of any kind to the board of directors, any security holder or any other person, as to how to act with respect to any matter relating to the Merger.

 

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Methodology: The Initial Exchange Ratio reflects an ownership ratio, whereby Wize shareholders are expected to own approximately 90% of the outstanding common stock of OphthaliX on a fully diluted basis (excluding the Future Investment Rights) while OphthaliX stockholders are expected to own the remaining approximate 10%. In order to evaluate the Initial Exchange Ratio, PBB examined several methodologies for the valuation of OphthaliX and Wize. Because, among other things, (1) OphthaliX has no ongoing business activity and no “active market” exists for trading of its shares (i.e., low trading volume in OphthaliX shares), PBB determined that the most suitable methodology to evaluate OphthaliX would be a net asset value (“NAV”) analysis, which is based on the fair value of OphthaliX’s assets less the fair value of its liabilities, and (2) Wize has an “active market” for trading of its shares, PBB determined that the most suitable methodology to evaluate Wize would be an aggregate market value (“AMV”) analysis based on the recent and historical market prices of Wize ordinary shares on the TASE.

 

  NAV Analysis of OphthaliX: In conducting its NAV analysis of OphthaliX, PBB assumed, consistent with the terms of the Merger Agreement, that at the Effective Time of the Merger, OphthaliX will have no assets, other than its holdings of 446,827 Can-Fite shares (which PBB evaluated based on their recent trading market prices), and will have no liabilities. In addition, PBB assigned a value of $150,000 to the fact that OphthaliX is a publicly traded shell. Based thereon, PBB assigned a value to OphthaliX that ranged between (1) on November 15, 2016, the date on which the non-binding letter of intent was signed, NIS 2,491,000 (which, based on an exchange rate of NIS 3.844 to one U.S. dollar, as quoted by the Bank of Israel on November 15, 2016, equates to approximately $648,000), (2) on February 20, 2017, the date on which the non-binding letter of intent was first publicly disclosed by Wize, NIS 2,241,000 (which, based on an exchange rate of NIS 3.707 to one U.S. dollar, as quoted by the Bank of Israel on February 20, 2017, equates to approximately $605,000), and (3) as of the Valuation Date, NIS 2,035,000 (which, based on an exchange rate of NIS 3.593 to one U.S. dollar, as quoted by the Bank of Israel as of immediately prior to the Valuation Date, equates to approximately $566,000).

 

  AMV Analysis of Wize: In conducting its AMV analysis of Wize, PBB reviewed recent and historical market prices and trading volumes of the Wize ordinary shares during the six-month period ended on the Valuation Date. Based thereon, PBB assigned a value to Wize that ranged between (1) on November 15, 2016, the date on which the non-binding letter of intent was signed, NIS 26,905,000 (which, based on an exchange rate of NIS 3.844 to one U.S. dollar, as quoted by the Bank of Israel on November 15, 2016, equates to approximately $6,999,000), (2) on February 20, 2017, the date on which the non-binding letter of intent was first publicly disclosed by Wize, NIS 28,690,000 (which, based on an exchange rate of NIS 3.707 to one U.S. dollar, as quoted by the Bank of Israel on February 20, 2017, equates to approximately $7,739,000), and (3) as of the Valuation Date, NIS 29,285,000 (which, based on an exchange rate of NIS 3.593 to one U.S. dollar, as quoted by the Bank of Israel as of immediately prior to the Valuation Date, equates to approximately $8,151,000).

 

Range of Ratios: Based on the aforesaid valuations, PBB indicated that the ownership ratio (on which the exchange ratio would be based), ranged between (1) on November 15, 2016, the date on which the non-binding letter of intent was signed, 91.5:8.5 (Wize/OphthaliX), (2) on February 20, 2017, the date on which the non-binding letter of intent was first publicly disclosed by Wize, 92.7:7.3 (Wize/OphthaliX), and (3) as of the Valuation Date, 93.5:6.5 (Wize/OphthaliX).

 

Financing Transaction: PBB also noted that, since one of the primary purposes of the Merger for Wize is to raise additional capital and not to create synergies between the parties, the Merger and the exchange ratio may also be examined as an equity financing transaction. To that end, PBB indicated that, based on a review of several financings of other TASE listed companies listed in its opinion, the Initial Exchange Ratio, which would reflect a discount of approximately 4%, is quite reasonable.

 

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PBB Experience and Independence: The opinion also includes an overview of the experience of PBB and its representatives as well as an acknowledgment of its independence.

 

Additional Considerations

 

The preparation of a fairness opinion is a complex process and is not susceptible to a partial analysis or summary description. PBB believes that its analyses must be considered as a whole and that selecting portions of its analyses, without considering the analyses taken as a whole, would create an incomplete view of the process underlying its opinion. In addition, PBB considered the results of all such analyses and did not assign relative weights to any of the analyses, but rather made qualitative judgments as to significance and relevance of each analysis and factor, so the ranges of valuations resulting from any particular analysis described above should not be taken to be the view of PBB as to the actual value of OphthaliX or Wize.

 

The analyses performed by PBB are not necessarily indicative of actual values, trading values or actual future results which might be achieved, all of which may be significantly more or less favorable than suggested by such analyses. The analyses do not purport to be appraisals or to reflect the prices at which companies may actually be sold, and such estimates are inherently subject to uncertainty. The opinion of PBB was one of a number of factors taken into account by the Wize Board in making its determination to approve the Merger. Neither PBB’s opinion nor the analyses described above should be viewed as the only factor considered by the Wize board or its management’s views with respect to Wize, OphthaliX or the Merger.

 

The PBB opinion was necessarily based upon market, economic, financial and other circumstances and conditions existing and disclosed to it by Wize, and any material change in such circumstances and conditions may affect its opinion, but PBB does not have any obligation to update, revise or reaffirm that opinion.

 

During the two years preceding the date of PBB’s written opinion, there were no material relationships or that are mutually understood to be contemplated in which any compensation was received or is intended to be received as a result of the relationship between PBB and any party to the merger, other than the March 2, 2017, engagement letter between PBB and Wize entered into in connection with the Merger.

 

For services rendered in connection with the delivery of its opinion, Wize is required to pay PBB a customary fee. However, Wize is not required to pay any fees to PBB which are contingent upon the closing of the Merger. Wize also agreed to reimburse PBB for certain expenses incurred in connection with its services, and will indemnify PBB against certain liabilities arising out of its engagement.

 

Listing of OphthaliX Common Stock; Delisting of Wize Ordinary Shares

 

OphthaliX common stock is currently quoted on the OTC Pink under the symbol “OPLI.” In connection with and immediately prior to the Merger, OphthaliX will change its name to “Wize Pharma, Inc.” in accordance with Delaware law.

 

Wize ordinary shares are currently listed on the TASE and trade under the symbol “WIZP”. Upon completion of the Merger, Wize ordinary shares will be delisted from the TASE and there will no longer be a public trading market for Wize ordinary shares.

 

Ownership of OphthaliX Following the Merger

 

OphthaliX and Wize anticipate that upon completion of the Merger, OphthaliX will have approximately 104,412,510 shares of common stock outstanding, with current Wize shareholders owning approximately 90% of the combined company and current OphthaliX stockholders owning approximately 10%.

 

Board Composition and Management of OphthaliX Following the Merger

 

Pursuant to the terms of the Merger Agreement, Wize has selected, and OphthaliX has agreed to appoint, each of Ron Mayron, whom is currently a director of Wize, Yossi Keret, Dr. Franck Amouyal and Joseph Zarzewsky, to OphthaliX’s board of directors at the Effective Time of the Merger. Each of OphthaliX’s current directors, other than Professor Michael Belkin, will resign following the appointment of the above-mentioned directors. At the request of Wize, Professor Belkin will continue to serve as a director of OphthaliX after the Effective Time of the Merger.

 

Following the Merger, OphthaliX will appoint Noam Danenberg, Wize’s current strategic advisor, to serve as Chief Operating Officer of OphthaliX post-merger and Or Eisenberg, Wize’s current Acting Chief Executive Officer and Chief Financial Officer, to serve as the Acting Chief Executive Officer and Chief Financial Officer of OphthaliX post-merger. OphthaliX’s current officers will resign following the appointment of the above-mentioned officers.

 

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Information about the individuals who will be directors and executive officers of OphthaliX, including biographical information, executive compensation and stock ownership, can be found in the sections titled “MANAGEMENT OF OPHTHALIX FOLLOWING THE MERGER” beginning on page 120, “PRINCIPAL STOCKHOLDERS OF OPHTHALIX” beginning on page 135 and “PRINCIPAL SHAREHOLDERS OF WIZE” beginning on page 136 of this proxy statement/prospectus.

 

Interests of OphthaliX’s Directors and Executive Officers in the Merger

 

In considering the recommendation of the OphthaliX board of directors that OphthaliX stockholders vote to approve all of the presented proposals, OphthaliX stockholders should be aware that some of OphthaliX’s directors and officers have interests in the Merger and have arrangements that are different from, or in addition to, those of OphthaliX stockholders generally. These interests and arrangements may create potential conflicts of interest. OphthaliX’s board of directors was aware of these interests and considered these interests, among other matters, in adopting and approving the Merger Agreement and the transactions contemplated thereby, including the Merger.

 

When OphthaliX’s stockholders consider the recommendation of OphthaliX’s board of directors in favor of approval of the Authorized Share Increase Proposal, the Name Change Proposal, the Election of Directors Proposal and the Adjournment Proposal, OphthaliX’s stockholders should keep in mind that OphthaliX’s directors and officers have interests in the Merger that are different from, or in addition to, the interests of its stockholders. These interests include, among other things:

 

Directors and Executive Officers of OphthaliX

 

OphthaliX’s current directors are Pnina Fishman, Ph.D., who is also OphthaliX’s Chairman of the Board and Chief Executive Officer, Ilan Cohn, Ph.D., Guy Regev, Roger Kornberg, Ph.D. and Michael Belkin, Ph.D. Itay Weinstein serves as OphthaliX’s Chief Financial Officer.

 

Following the Merger and subsequent to the appointment of Ron Mayron, Yossi Keret, Dr. Franck Amouyal and Joseph Zarzewsky to the board of directors of OphthaliX, all of OphthaliX’s directors and officers will resign from such positions except for Professor Belkin who will continue to serve as a director.

 

Common Stock Ownership

 

As of September 5, 2017, the directors and executive officers of OphthaliX owned shares of OphthaliX common stock as follows:

 

Pnina Fishman owned 9,712 shares of OphthaliX’s common stock.

 

Guy Regev owned 56,786 shares of OphthaliX’s common stock.

 

Stock Options

 

As of September 5, 2017, the directors and executive officers of OphthaliX beneficially owned stock options as follows:

 

Roger Kornberg and Michael Belkin each had outstanding stock options to purchase 52,222 shares of OphthaliX’s common stock.

 

Itay Weinstein had outstanding stock options to purchase an aggregate of 13,056 shares of OphthaliX’s common stock.

 

Sale of Eyefite to Can-Fite

 

As a condition to closing of the Merger, OphthaliX is required, pursuant to a Stock Purchase Agreement, to sell on an “as is” basis to Can-Fite (OphthaliX’s parent and holder of approximately 82% of the outstanding shares of common stock of OphthaliX) all the ordinary shares of Eyefite, in exchange for the irrevocable cancellation and waiver of all indebtedness owed by OphthaliX and Eyefite to Can-Fite, including approximately $4.8 million of deferred payments owed by OphthaliX and Eyefite to Can-Fite and, as part of the purchase of Eyefite, Can-Fite will also assume certain accrued milestone payments in the amount of $175,000 under the Can-Fite License Agreement. Immediately following the sale of Eyefite to Can-Fite, and prior to closing of the Merger, it is expected that OphthaliX’s sole asset shall consist of 446,827 ordinary shares of Can-Fite. In addition, as a condition to closing of the Merger, the Can-Fite License Agreement is required to be terminated pursuant to a Termination of License Agreement and a Termination of Services Agreement. See “AGREEMENTS RELATING TO THE MERGER” beginning on page 84 of this proxy statement/prospectus.

 

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Can-Fite is OphthaliX’s parent, which owns 8,563,261shares of OphthaliX’s common stock, or 82% of the outstanding shares of OphthaliX’s common stock. 

 

The following directors and executive officers of OphthaliX serve as directors and/or executive officers of its parent Can-Fite:

 

  Pnina Fishman, OphthaliX’s Chairman and Chief Executive Officer also serves as a director and Chief Executive Officer of Can-Fite and as of September 5, 2017 beneficially owns 470,637 ordinary shares of Can-Fite, or 1.4% of the outstanding ordinary shares of Can-Fite;

 

  Ilan Cohen, a director of OphthaliX, also serves as Chairman of Can-Fite and as of September 5, 2017 beneficially owns 133,567 ordinary shares of Can-Fite, or 0.4% of the outstanding ordinary shares of Can-Fite.

 

  Guy Regev, a director of OphthaliX, also serves as a director of Can-Fite and as of September 5, 2017 beneficially owns 54,240 ordinary shares of Can-Fite, or 0.2% of the outstanding ordinary shares of Can-Fite. 

 

In addition, Itay Weinstein, OphthaliX’s Chief Financial Officer, is the controller of Can-Fite and as of September 5, 2017 beneficially owns 15,000 ordinary shares of Can-Fite, or 0.05% of the outstanding ordinary shares of Can-Fite.

 

Can-Fite License Agreement

 

On November 21, 2011, OphthaliX entered into the Can-Fite License Agreement with Eyefite, OphthaliX’s wholly-owned subsidiary, and Can-Fite according to which Can-Fite (i) granted to Eyefite a sole and exclusive worldwide license for the use of CF101, Can-Fite’s therapeutic drug candidate, solely in the field of ophthalmic diseases and (ii) assigned to Eyefite its rights, title and interest in and to any and all INDs, to CF101 in the ophthalmic field. The license granted to Eyefite allows Eyefite to sublicense its rights to CF101 to third parties, subject to the satisfaction of certain conditions. Pursuant to the Can-Fite License Agreement, Eyefite has sole responsibility for preparing and maintaining all regulatory documentation with respect to approvals of CF101 in the field of ophthalmic diseases and all approvals and related regulatory documentation shall be Eyefite’s sole and exclusive property. Under the Can-Fite License Agreement, Eyefite was required to assume responsibility for making payments to Can-Fite’s licensor, the National Institutes of Health (the “NIH”), pursuant to, and for the term of, a license agreement between Can-Fite and NIH for certain patent rights relating to CF101. In June 2015, Can-Fite’s license with NIH expired and as a result Eyefite is no longer obligated to make any payments to NIH in connection with Can-Fite’s now expired license with NIH (other than with respect to any accrued and unpaid payments to which NIH may be entitled to). Patent rights granted to Eyefite under the Can-Fite License Agreement by Can-Fite that are not NIH patents are free of any royalties and milestone payments.

 

As a condition to closing of the Merger, the Can-Fite License Agreement is required to be terminated pursuant to a Termination of License Agreement. See “AGREEMENTS RELATING TO THE MERGER —  Agreements Related to the Sale of EyeFite to Can-Fite” beginning on page 84 of this proxy statement/prospectus.

 

Can-Fite Services Agreement

 

On November 21, 2011, EyeFite and Can-Fite entered into the Can-Fite Services Agreement pursuant to which Can-Fite manages, as an independent contractor, all activities relating to pre-clinical and clinical studies performed for the development of the ophthalmic indications of CF101. The Can-Fite Services Agreement will remain in force for an unlimited period of time unless earlier terminated as follows: (i) by either party upon six-months’ prior written notice to the other party; or (ii) at any time for cause by either EyeFite (which includes a breach of trust by Can-Fite, Can-Fite’s material breach of the Services Agreement or customary bankruptcy and insolvency events on the part of Can-Fite) or Can-Fite (which includes EyeFite’s material breach of the Can-Fite Services Agreement or the Can-Fite License Agreement, or customary bankruptcy and insolvency events on the part of EyeFite). As consideration for Can-Fite’s services pursuant to the Can-Fite Services Agreement, EyeFite must pay to Can-Fite (i) a services fee (consisting of all expenses and costs incurred by Can-Fite plus 15%, except in relation to patent payments which shall be treated on a pass through basis) and, (ii) additional fees equal to 2.5% of any revenues received by OphthaliX (or any affiliate of ours including, Eyefite) for rights to CF101 from third-party sublicensees including up-front payments, developmental or commercial milestones, royalties on net sales and any similar payments, but not including payments to support or reimburse OphthaliX for research, development, manufacturing or commercial expenses or for equity. OphthaliX is required to pay the additional fees to Can-Fite within 30 days of receipt by OphthaliX.

 

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As a condition to closing of the Merger, the Can-Fite License Agreement is required to be terminated pursuant to a Termination of Services Agreement. See “AGREEMENTS RELATING TO THE MERGER —  Agreements Related to the Sale of EyeFite to Can-Fite” beginning on page 84 of this proxy statement/prospectus.

 

Can-Fite Support Letters

 

In February 2013, Can-Fite issued OphthaliX a formal letter, as last updated in August 2015, stating that Can-Fite agreed to defer the payments under the Can-Fite Services Agreement from January 31, 2013 for the performance of the clinical trials of CF101 in ophthalmic indications until the completion of a fundraising by OphthaliX that will allow such payments. Also, in August 2015, Can-Fite issued another financial support letter, pursuant to which it committed to cover any shortfall in the costs and expenses of operations of OphthaliX which were in excess of OphthaliX’s available cash to finance its operations, including cash generated from any future sale of Can-Fite shares. Any related balance on amounts owed bore interest at a rate of 3% per annum. Both letters expired on October 10, 2016. On November 14, 2016 Can-Fite agreed to extend the support letter under the same terms and conditions in order to fund OphthaliX operations. Such letter expired on February 28, 2017.  Deferred payments under the Services Agreement are currently due. As of June 30, 2017, the deferred payments to Can-Fite totaled approximately $4,758,000.

 

Indemnification and Liability Insurance

 

In connection with the Merger, OphthaliX will continue to indemnify its current directors and officers to the maximum extent permitted in accordance with applicable law, the OphthaliX Certificate of Incorporation and the OphthaliX Bylaws, and any contractual arrangements. OphthaliX intends to obtain a directors’ and officers’ liability “tail” insurance policy for at least an additional six years after the Merger.

 

Regulatory Approvals Required for the Merger

 

Completion of the Merger is subject to prior receipt of all approvals required to be obtained from applicable governmental and regulatory authorities.

 

OphthaliX and Wize believe that the Merger does not raise substantial antitrust or other significant regulatory concerns and that both parties will be able to obtain all requisite regulatory approvals prior to the anticipated closing. However, at any time before or after the Effective Time of the Merger, the Federal Trade Commission, the U.S. Department of Justice Antitrust Division or others (including foreign regulatory agencies, states and private parties) could challenge the Merger and take action under antitrust laws. There can be no assurance that a challenge to the Merger on antitrust grounds will not be made or, if such challenge is made, that it would not be successful.

 

OphthaliX must also comply with the applicable federal and state securities laws in connection with the issuance of shares of OphthaliX common stock in the Merger and the filing with the SEC of the registration statement of which this proxy statement/prospectus forms a part.

 

The foregoing is a summary of the material regulatory requirements for the Merger, satisfaction or waiver of certain requirements which is a condition to the completion of the Merger. There can be no guarantee as to if and when any of the consents or approvals required for the Merger will be obtained or as to the conditions that such consents and approvals may contain.

 

Israeli Court Approval. The Merger and the other transactions contemplated under the Merger Agreement including a request to exempt OphthaliX from the need to publish a prospectus by reason of Section 15A(a)(3) of the Israel Securities Law are being effected in accordance with Sections 350 and 351 of the Israeli Companies Law.

 

Wize is required to prepare and submit to the District Court of Lod (the “District Court”) a motion (the “First Motion”) to convene, in the manner and content set forth in the Israeli Companies Law and the regulations promulgated pursuant to Sections 350 and 351 of the Israeli Companies Law and as shall be ordered by the District Court a special general meeting of the Wize shareholders (the “Wize Meeting”) (and, if necessary, creditors’ meetings), for the approval of the terms and conditions of the Arrangement among Wize and its shareholders by the requisite majority.

 

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Wize is obligated to prepare and file with the ISA a proxy statement relating to the applicable Wize Meeting and, promptly respond to any comments or other written communication from the ISA with respect to such proxy statement.

 

On August 10, 2017, the First Motion was filed with the District Court requesting, among other things, that the District Court order the convening of the Wize Meeting. Pursuant to the Israeli Companies Law, Wize published notice of the First Motion, sent notice to its five percent shareholders, and filed the Motion with the Israeli Registrar of Companies. On August 10, 2017, the District Court issued an order to convene the Wize Meeting, as requested (the “Order”). On August 28, 2017, the District Court issued a decision exempting Wize from the obligation to convene a creditors' meeting.

 

Upon approval of the Merger by the requisite vote of the Wize shareholders at the Wize Meeting, Wize will, within 14 days of such shareholder approval, apply a second motion to the District Court to approve the Arrangement (the “Second Motion”).

 

Any person, including shareholders and creditors of Wize, may object to the First Motion by filing an objection with the District Court within 21 days of the filing of the First Motion. After filing the Second Motion there shall be an additional period of 10 days from publication of such filing or from receipt of the Second Motion (as applicable) to file objections with the District Court. Pursuant to the provisions of Israeli law, the Merger will not become effective and binding unless and until the Arrangement is approved by the District Court.

 

Israel Securities Authority. The ISA must be given the opportunity to appear in the proceeding at the Israeli court and state its view with respect to the necessity of OphthaliX publishing a prospectus in order to secure the interests of the public. On August 28, 2017, after the ISA’s submission of its view to the District Court, the District Court issued a decision exempting OphthaliX from publishing a prospectus, subject to certain customary conditions.

 

Israeli Tax Ruling. OphthaliX and Wize have agreed that Wize would request a certain ruling from the Israeli Tax Authority. The ruling request submitted by Wize seeks the Israeli Tax Authority’s approval that the obligation to pay capital gains tax on the exchange of the Wize ordinary shares for OphthaliX common stock will be deferred in accordance with the provisions of Section 104(h) of the Israeli Tax Ordinance (the “104(h) Tax Ruling”). Receipt of this ruling is a condition for the completion of the Merger, although Wize may decide to waive it. There can be no assurance that this ruling will be obtained. For more information regarding the 104(h) Tax Ruling, please see “CERTAIN MATERIAL ISRAELI TAX CONSEQUENCES OF THE MERGER – 104(h) Tax Ruling” on page 143 of this proxy statement/prospectus.

 

The foregoing is a summary of the material regulatory requirements for the Merger, satisfaction or waiver of certain of which requirements is a condition to the completion of the Merger. There can be no guarantee as to if and when any of the consents or approvals required for the Merger will be obtained or as to the conditions that such consents and approvals may contain.

 

Accounting Treatment

 

Although OphthaliX is the legal acquirer and will issue shares of its common stock to effect the Merger with Wize, the Merger is accounted for as a reverse recapitalization of OphthaliX by Wize. Under reverse recapitalization accounting, the assets and liabilities of OphthaliX will be recorded, as of the completion of the Merger, at their historical amounts. Consequently, the interim consolidated financial statements of Wize reflect the operations of the acquirer for accounting purposes together with a deemed issuance of shares, equivalent to the shares held by the former stockholders of the legal acquirer and a recapitalization at the equity of the accounting acquirer. These interim consolidated financial statements include the accounts of the Wize since the effective date of the reverse recapitalization and the accounts of OphthaliX since inception.

 

Restrictions on Sales of Shares by Affiliates

 

The shares of OphthaliX common stock to be issued in connection with the Merger will be registered under the Securities Act and will be freely transferable under the Securities Act, except for shares of OphthaliX common stock issued or issuable to any person who is deemed to be an “affiliate” of Wize at the time of the Wize shareholders’ meeting. Persons who may be deemed to be affiliates include individuals or entities that control, are controlled by, or are under the common control of Wize and may include Wize’s executive officers and directors, as well as any significant stockholders.

 

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Affiliates of Wize may not sell their shares of OphthaliX common stock acquired in connection with the Merger except pursuant to:

 

an effective registration statement under the Securities Act covering the resale of those shares;

 

an exemption under paragraph (d) of Rule 145 under the Securities Act; or

 

any other applicable exemption under the Securities Act.

 

OphthaliX’s registration statement on Form S-4, of which this proxy statement/prospectus is a part, does not cover the resale of shares of OphthaliX common stock to be received by Wize’s affiliates in the merger, including OphthaliX common stock issuable upon the conversion of any assumed Convertible Loans and the exercise of any Future Investment Rights upon completion of the Merger. No person is authorized to make use of this proxy statement/prospectus in connection with any resale of OphthaliX common stock received by them or issuable in the Merger.

 

U.S. Federal Income Tax Considerations

 

OphthaliX believes that the Merger is expected to be a taxable exchange for U.S. federal income tax purposes. Assuming the Merger so qualifies, the following U.S. federal income tax consequences generally will result to a participating U.S. holder: (i) such holder generally will recognize gain or loss on the receipt of OphthaliX common stock in exchange for Wize ordinary shares in the Merger; (ii) such holder’s aggregate tax basis in the OphthaliX common stock received pursuant to the Merger will be equal to the fair market value of the OphthaliX common stock received by such U.S. holder on the date Wize ordinary shares are exchanged pursuant to the Merger and determined in good faith by the OphthaliX board of directors; and (iii) such holder’s holding period for the OphthaliX common stock will begin on the day following the date such U.S. holder’s Wize ordinary shares are exchanged pursuant to the Merger.

 

Immediately prior to the Merger, OphthaliX expects to have remaining liabilities of approximately $4.8 million, of which approximately $3.5 million are liabilities of Eyefite and approximately $1.3 million are liabilities of OphthaliX. Of these liabilities approximately $4.8 million will be cancelled in exchange for the sale of Eyefite to Can-Fite, and as a result, from a U.S. federal income tax perspective, OphthaliX will realize cancellation of indebtedness income. Because OphthaliX will be insolvent at that time by the amount of the remaining liabilities, OphthaliX will not recognize any cancellation of indebtedness income for U.S. federal income tax purposes.

 

For a more complete discussion of the U.S. federal income tax consequences of the Merger, see the section titled “CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER” beginning on page 138 of this proxy statement/prospectus.

 

Material Israeli Tax Considerations

 

In general, under the Israeli Tax Ordinance, the disposition of shares of an Israeli company is deemed to be a sale of capital assets (unless such shares are not held as a capital asset). The Israeli Tax Ordinance generally imposes a capital gains tax on the sale of capital assets located in Israel, including shares in an Israeli resident company, by both residents and non-residents of Israel, unless a specific exemption is available or unless a treaty for the prevention of double taxation between Israel and the seller’s country of residence provides otherwise. Assuming Wize receives the 104(h) Tax Ruling from the Israel Tax Authority for which Wize has applied, the Israeli income tax consequences of the Merger shall be in accordance with such tax ruling (if applicable to a particular Wize shareholder).

 

For a more complete discussion of the material Israeli tax consequences of the Merger, see the section titled “CERTAIN MATERIAL ISRAELI TAX CONSEQUENCES OF THE MERGER” beginning on page 142 of this proxy statement/prospectus.

 

Appraisal Rights

 

OphthaliX stockholders do not have any appraisal rights under Delaware law in connection with respect to any of the matters to be voted on at the OphthaliX annual meeting.

 

THE MERGER AGREEMENT

 

The following summary describes the material provisions of the Merger Agreement. The provisions of the Merger Agreement are complicated and not easily summarized. This summary may not contain all of the information about the Merger Agreement that is important to you. This summary is qualified in its entirety by reference to the full text of the Merger Agreement, which is attached to this proxy statement/prospectus as Annex A and is incorporated by reference into this proxy statement/prospectus. You should read the Merger Agreement carefully and in its entirety, as it is the legal document governing the Merger and the other transactions contemplated thereby.

 

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The Merger Agreement has been included to provide you with information regarding its terms and the transactions described in this proxy statement/prospectus. Neither OphthaliX nor Wize intends that the Merger Agreement will be a source of business or operational information about OphthaliX or Wize. The representations, warranties and covenants made in the Merger Agreement by OphthaliX and Wize were made solely to the parties to, and solely for the purposes of, the Merger Agreement and as of specific dates, and were qualified and subject to important limitations agreed to by the OphthaliX and Wize in connection with negotiating the terms of the Merger Agreement. In particular, in your review of the representations and warranties contained in the Merger Agreement and described in this summary, it is important to bear in mind that the representations and warranties were negotiated with the principal purposes of establishing the circumstances in which a party to the Merger Agreement may have the right not to complete the Merger if the representations and warranties of the other party prove to be untrue due to a change in circumstance or otherwise, and allocating risk between the parties to the Merger Agreement, rather than establishing matters as facts. The representations and warranties may also be subject to a contractual standard of materiality different from those generally applicable to stockholders and reports and documents filed with the SEC and in some cases were qualified by disclosures that are not reflected in the Merger Agreement. Moreover, information concerning the subject matter of the representations and warranties may have changed since the date of the Merger Agreement. You should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts of the OphthaliX, Wize and Merger Sub or any of their respective subsidiaries or affiliates.

 

Form, Effective Time and Closing of Merger

 

The Merger Agreement provides that, at the Effective Time of the Merger, Merger Sub, an Israeli wholly owned subsidiary of OphthaliX, will merge with and into Wize. Upon completion of the Merger, the separate corporate existence of Merger Sub will cease, and Wize will continue as the surviving entity and as a wholly owned subsidiary of OphthaliX. Immediately prior to the Merger, OphthaliX will change its name to “Wize Pharma, Inc.”

 

The Merger and the other transactions contemplated under the Merger Agreement are being effected by way of an Israeli court-approved plan of arrangement among the Merger Sub, Wize and their respective shareholders and (if applicable) creditors, in accordance with Sections 350 and 351 of the Israeli Companies Law.

 

The closing of the Merger will occur no later than five business days after the fulfillment or waiver of all of the conditions to completion of the Merger (other than those conditions which will be satisfied at the closing), which conditions are described below under “—Conditions to Completion of the Merger” beginning on page 81, or on such other date as OphthaliX and Wize may in advance mutually agree.

 

Effects of Merger; Merger Consideration

 

According to the Merger Agreement, at the Effective Time of the Merger, each ordinary share of Wize that is issued and outstanding will be automatically cancelled and converted into the right to receive that number of validly issued, fully paid and non-assessable shares of OphthaliX common stock equal to an exchange ratio, which was initially 5.3681 shares of OphthaliX common stock for each one Wize ordinary share.

 

The exchange ratio is adjustable in connection with certain equity financings made by Wize on or after the date of the Merger Agreement and prior to the Effective Time, as more fully described under “- Covenants and Agreements - Conduct of Business Prior the Completion of the Merger” below. To that end, as a result of the 2017 PIPE of Wize conducted after the date of the Merger Agreement, as described under “INFORMATION ABOUT WIZE — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 of this proxy statement/prospectus, (1) on account of the completion of the Perez Financing described thereunder, the exchange ratio adjusted to 5.1617 shares of OphthaliX common stock for each one Wize ordinary share, and (2) on account of the completion of the Other Financing described thereunder, the exchange ratio further adjusted to 4.1781 shares of OphthaliX common stock for each one Wize ordinary share.

 

The exchange ratio will also be adjusted as necessary to reflect appropriately the effect of any forward or reverse stock split, stock dividend (including any dividend or distribution of convertible securities), extraordinary cash dividends, reorganization, recapitalization, reclassification, combination, exchange of shares or other like change with respect to OphthaliX common stock or Wize ordinary shares occurring on or after the date of the Merger Agreement and prior to the Effective Time.

 

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All shares of Wize held immediately prior to the Effective Time by Wize as treasury stock or otherwise, if any, and by OphthaliX or any direct or indirect wholly owned subsidiary of OphthaliX, will be cancelled and no payment will be made with respect to those shares.

 

Each issued and outstanding share of Merger Sub’s ordinary shares will convert into one ordinary share of the post-merger Wize, which will represent the only outstanding shares of capital stock of the post-merger Wize from and after the Effective Time.

 

Fractional Shares

 

No fractional shares of OphthaliX common stock will be issued to Wize shareholders pursuant to the Merger. Instead, any fractional shares of OphthaliX common stock that would be issuable to Wize shareholders pursuant to the Merger will be rounded down to the next whole share.

 

Treatment of Wize Convertible Debt

 

Each Convertible Note existing at the time of the Merger Agreement will constitute a convertible note to purchase the number of shares of OphthaliX common stock equal to the number of Wize ordinary shares that were subject to a Convertible Note immediately prior to the Effective Time multiplied by the exchange ratio at a proportionally adjusted conversion price. In this respect, it was further agreed that the conversion of all or part of Convertible Loans (including the Future Investment Rights), whether before or after the Effective Time, shall not modify the exchange ratio. For additional information about the Convertible Loans, see under “INFORMATION ABOUT WIZE — Management’s Discussion and Analysis of Financial Condition and Results of Operations” beginning on page 113 of this proxy statement/prospectus.

 

Exchange of Wize Certificates; Withholding Taxes

 

As soon as reasonably practicable after the Effective Time, a mutually agreed upon commercial bank, trust company, depositary or shareholder service provider, acting as exchange agent (the “Exchange Agent”) is required to send to each holder of record of Wize ordinary shares, whose shares are converted according to the Merger Agreement, a letter of transmittal and instructions for use in surrendering the certificates representing the Wize ordinary shares. Upon delivery to the Exchange Agent of a duly executed letter of transmittal and such other documents as may be reasonably requested, a holder of ordinary shares of Wize will be entitled to receive the applicable portion of the Merger consideration. In the case of any record holders of Wize ordinary shares represented by physical certificates, OphthaliX may send the letter of transmittal instead of the Exchange Agent.

 

All shares of OphthaliX common stock issued as merger consideration in accordance with the terms of the Merger Agreement will be deemed to have been issued in full satisfaction of all rights pertaining to the Wize ordinary shares. From and after the Effective Time, there shall be no further registration of transfers on the share transfer books of post-merger Wize of Wize ordinary shares that were outstanding immediately prior to the Effective Time.

 

Any portion of the merger consideration deposited into an exchange fund that remains undistributed to the holders of Wize ordinary shares following 12 months from the closing of the Merger (the “Closing Date”) is required to be delivered to OphthaliX, upon its demand, and any holders of Wize ordinary shares who have not, up to then, complied with the exchange procedures will from then on look only to OphthaliX for OphthaliX common stock and any dividends or distributions with respect to such OphthaliX common stock. Any portion of the exchange fund remaining unclaimed by holders of Wize shares as of a date, which is immediately prior to such time as such amounts would otherwise escheat to or become property of any governmental authority, will, to the extent permitted by applicable law, become the property of OphthaliX free and clear of any claims or interest of any person.

 

Any holder of Wize ordinary shares may be subject to withholding under the Internal Revenue Code, the Israeli Tax Ordinance, or any applicable tax law. Wize or the Exchange Agent will be entitled to deduct and withhold from the consideration otherwise payable according to the Merger Agreement such amounts as may be required to be deducted and withheld with respect to the making of such payment under the Internal Revenue Code, the Israeli Tax Ordinance, or any applicable tax law, unless an applicable valid certificate of exemption from such deduction or withholding is issued by the relevant taxing authority and provided to OphthaliX, Wize or the Exchange Agent prior to any payment. Any withheld amounts will be treated for all purposes of the Merger Agreement as having been paid to the persons otherwise entitled to them. In this respect, it was further agreed that the 104(h) Tax Ruling, as described under “CERTAIN MATERIAL ISRAELI TAX CONSEQUENCES OF THE MERGER” on page 142 of this proxy statement/prospectus, will be considered as valid certificate of exemption with respect to the holders of Wize ordinary shares.

 

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Representations and Warranties

 

The Merger Agreement contains representations and warranties made by OphthaliX to Wize and by Wize to OphthaliX.

 

OphthaliX made representations and warranties to Wize, including those related to the following matters:

 

organization, corporate power, qualifications to do business as a foreign corporation and good standing;

 

authorization of OphthaliX and Merger Sub to execute, deliver and perform the Merger Agreement, including the Merger;

 

capitalization and capital structure;

 

compliance with applicable laws and permits;

 

governmental approvals or consents required to execute, deliver or perform the Merger Agreement or complete the Merger;

 

absence of certain conflicts, violations, consents, defaults or breaches arising out of the execution, delivery or performance of the Merger Agreement or completion of the Merger;

 

SEC filings, financial statements and compliance with the Sarbanes-Oxley Act;

 

absence of litigation, claims or outstanding governmental orders or investigations;

 

books and records;

 

internal accounting controls;

 

quotation on OTC Pink and eligibility for OTCQB;

 

authorization, validity and payment of OphthaliX common stock to be issued in the Merger free and clear of any restrictions on transfer;

 

eligibility for DTC’s Fast Automated Securities Transfer Program;

 

with respect to information supplied or to be supplied by OphthaliX for inclusion in the Form S-4 of which this proxy/prospectus is a part, absence of any untrue statement of material fact or omission necessary to make the statements not misleading;

 

taxes and tax returns; and

 

absence of employees.

 

Wize made representations and warranties to OphthaliX in the Merger Agreement, including representations and warranties relating to the following matters:

 

organization, corporate power, qualifications to do business as a foreign corporation and good standing;

 

authorization of Wize to execute, deliver and perform the Merger Agreement, including the Merger;

 

capitalization and capital structure;

 

compliance with applicable laws and permits;

 

governmental approvals or consents required to execute, deliver or perform the Merger Agreement or complete the Merger;

 

absence of certain conflicts, violations, consents, defaults or breaches arising out of the execution, delivery or performance of the Merger Agreement or completion of the Merger;

 

  ISA filings and financial statements;

 

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absence of litigation, claims or outstanding governmental orders or investigations;

 

books and records;

 

internal accounting controls;

 

authorization, validity and payment of Wize ordinary shares to be cancelled;

 

with respect to information supplied or to be supplied by Wize for inclusion in the Form S-4 of which this proxy/prospectus is a part, absence of any untrue statement of material fact or omission necessary to make the statements not misleading; and

 

taxes and tax returns.

 

Certain representations and warranties in the Merger Agreement are qualified as to as to “materiality,” “knowledge” or “material adverse effect.” For purposes of the Merger Agreement, a “material adverse effect,” means, with respect to the relevant entity, any event, occurrence, fact, condition or change that is, or would reasonably be expected to become, individually or in the aggregate, materially adverse to (i) the business, results of operations, financial condition, or assets of an entity and its subsidiaries, taken as a whole, or (ii) the ability of an entity to consummate the transactions on a timely basis; provided, that, for the purposes of clause (i) above, a material adverse effect will not include events, occurrences, facts, conditions or changes arising out of, relating to or resulting from:

 

changes generally affecting the economy, or financial or securities markets;

 

any actions contemplated by the parties in connection with, or actions required to be taken by, this Agreement or the pendency or the announcement of the transactions contemplated by this Agreement;

 

acts of God, hostilities or any outbreak or escalation of war or any act of terrorism;

 

general conditions in the political environment, industry or market in which such entity and its subsidiaries operate;

 

changes after the date of the Merger Agreement in applicable law, GAAP, IFRS, or regulatory accounting requirements, or the interpretation of any of the foregoing;

 

changes after the date of the Merger Agreement in laws of general applicability to companies in the industry in which such entity and its subsidiaries operate;

 

actions or omissions taken with the prior written consent of the other party to the Merger Agreement or expressly required by the Merger Agreement;

 

any failure to meet published analysts’ estimates, internal or external projections or forecasts of revenue, earnings or other financial or business metrics, or fluctuations in the trading price of the share capital of the applicable entity.

 

Certain of the changes and effects referred to in the above bullet list will not be taken into account in determining whether a material adverse effect has occurred or would reasonably be expected to occur if such event, change or effect has a disproportionate effect on an entity and its subsidiaries, when compared to other businesses operating in the industry and jurisdictions in which the applicable entity operates.

 

Covenants and Agreements

 

Conduct of Business Prior the Completion of the Merger

 

OphthaliX agreed to (i) conduct its business in accordance with its ordinary and usual course of business; (ii) use its best efforts to preserve OphthaliX’s business organization, keep available to OphthaliX the services of OphthaliX’s officers and employees and maintain satisfactory relationships with customers, suppliers and others having business relationships with it; (iii) confer with Wize representatives to keep them informed with respect to material, operational matters and to report the general status of the ongoing operations of the business of OphthaliX; and (iv) maintain OphthaliX’s books and records.  OphthaliX also agreed to refrain from taking any of the following actions during the period prior to the Closing Date without the express prior written consent of Wize:

 

incur any debt, liability or obligation or pay any debt, liability or obligation of any kind other than such current liabilities and current maturities of existing long-term debt, and, other than (i) legal and accounting fees incurred in connection with the Merger, (ii) the costs of the OphthaliX tail policies, and (iii) current liabilities incurred in the ordinary and usual course of OphthaliX’s business, in an amount not to exceed $20,000 per month and $80,000 in the aggregate;