Significant Transactions

9 Months Ended

Sep. 30, 2020

Significant Transactions [Abstract]

SIGNIFICANT TRANSACTIONS

NOTE 5:- SIGNIFICANT TRANSACTIONS

The Bonus/LO2A Transaction

On January 9, 2020, the Company entered into (i) an Exchange Agreement (the "Bonus Exchange Agreement"), with Bonus and (ii) a Share Purchase Agreement (the "Bonus Purchase Agreement" and, together with the Bonus Exchange Agreement, the "Bonus Agreements") with Bonus.

Pursuant to the Bonus Agreements, the Company agreed to grant Bonus, in consideration for the issuance of 62,370,000 ordinary shares of Bonus to the Company (the "LO2A Shares"), the right to receive 37% of future LO2A Proceeds (if any), which, as more fully defined in the Bonus Exchange Agreement, include proceeds generated by the Company, Wize Israel and OcuWize, as a result of (i) the sale, license or other disposal of products or other rights underlying the LO2A technology licensed to OcuWize under the License Agreement; and (ii) a Sale Transaction, which, as more fully defined in the Bonus Exchange Agreement, includes the sale of shares or assets of Wize Israel and/or OcuWize. In addition, if the Sale Transaction involves a change of control of the Company, Bonus will be entitled to elect, to either remain with its right to 37% of the LO2A Proceeds or receive a one-time payment equal to 37% of the value attributed to Wize Israel out of the total proceeds payable for the Company in such transaction.

In addition, pursuant to the Bonus Purchase Agreement, the Company agreed to purchase 51,282,000 ordinary shares of Bonus (the "PIPE Shares", and together with the LO2A Shares, the "Bonus Shares"), for an aggregate purchase price of $7,400 in cash, which funds were deposited directly into an escrow account (the "Bonus Escrow Account"), of which (i) $500 was paid to Bonus as an advance promptly following execution of the Bonus Purchase Agreement, (ii) $3,200 was released to Bonus concurrently with the closing of the transactions contemplated by the Bonus Agreements in exchange for 50% of the PIPE Shares and (iii) $3,700 will be released to Bonus upon the Milestone Closing (as defined in the Bonus Purchase Agreement), in exchange for the remaining 50% of the PIPE Shares that were issued by Bonus and deposited into the escrow at the closing. The Company's obligation to consummate the Milestone Closing is conditioned upon the satisfaction by Bonus of certain conditions, including the listing of its ordinary shares (or, if an ADR Program is to be implemented by Bonus, the American Depositary Shares representing such ordinary shares) on the Nasdaq Capital Market (or another superior tier of the Nasdaq market) (the "Nasdaq Listing"). However, as of September 30, 2020 and as of the date of these financial statements, Bonus has not satisfied the Nasdaq Listing condition and the Milestone Closing has not occurred.

The Bonus Agreements contain customary covenants, representations and warranties of the parties thereto, including, among others, (i) a covenant by the Company to use its reasonable commercial efforts to commercialize the LO2A technology or otherwise generate the LO2A Proceeds; (ii) a covenant by Bonus to issue additional shares to the Company upon certain events, including if Bonus conducts a private placement of its ordinary shares during the nine-month period following the closing at a price per share that is below NIS 0.30 per share; (iii) a covenant by Bonus to use its reasonable commercial efforts to conduct the Nasdaq Listing as soon as practicable, and in any event within 180 days following the closing (the "Initial Deadline") and, if the Nasdaq Listing does not occur by the Initial Deadline, the Company will be entitled to liquidated damages for each 30 days of delay. The liquidated damages, which range between $20 to $164 depending on the length of the delay, may be paid, at Bonus' election, in either cash or ordinary shares of Bonus; and (iv) a post-closing covenant by the Company to create, and cause Wize Israel and OcuWize to create, certain first priority liens in favor of Bonus to secure the Company's obligations under the Bonus Exchange Agreement, including certain related negative covenants.

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

Regarding the requirement to release the remaining escrow amount of $3,700 to the Series B investors if Bonus fails to achieve the Nasdaq Listing, see below.

According to the Bonus Agreements, as amended, the total number of Bonus Shares issuable to the Company (including the shares to be released at the Milestone Closing) was computed as the number of ordinary shares of Bonus equal to the quotient obtained by dividing (A) $16,400 expressed in NIS (based on the exchange rate between NIS and the dollar as of January 8, 2020) by (B) NIS 0.50. As of January 9, 2020, such total number of Bonus Shares represented (on a post-issuance basis) approximately 12% of the outstanding share capital of Bonus. The fair value of Bonus shares based on a quote of the share price on January 9, 2020, the date of signing the Bonus Agreements, was $0.12 per share and, as of the date of the closing was $0.11 per share.

The closing of the transactions contemplated by the Bonus Agreements, as amended, was subject to several customary conditions, including the execution by Bonus and the Company of a Registration Rights Agreement (the "Bonus Registration Rights Agreement"), pursuant to which Bonus will be required to file a resale registration statement (the "Resale Registration Statement") with the SEC to register the Bonus Shares for resale, within 30 days following the Nasdaq Listing, and to have the Resale Registration Statement declared effective within 45 days after the Nasdaq Listing in the event the Resale Registration Statement is not reviewed by the SEC, or 120 days after the Nasdaq Listing in the event the Resale Registration Statement is reviewed by the SEC.

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

As of the date of closing of the Bonus Agreements, the Company received 85,239,000 of Bonus Shares. Pursuant to the Bonus Agreements, an additional 28,413,000 Bonus Shares were to be released to the Company upon the Nasdaq Listing and concurrently with the release of the $3,700 from the escrow account to Bonus. However, as of September 30, 2020 and as of the date of these financial statements, Bonus has not satisfied the Nasdaq Listing condition and the Milestone Closing has not occurred. Accordingly, such amount is presented as restricted deposit (asset) in the balance sheet as of September 30, 2020 and the same amount is reflected as part of the liability with respect to the Series B Preferred Stock (as defined below). The Bonus Agreements also provide that, in the event that the Milestone Closing shall not occur on or before twelve (12) months following the Initial Deadline (the "Milestone End Date"), the Company may terminate the requirement to conduct the Milestone Closing by written notice to Bonus, with a copy to the escrow agent (the "Investor Milestone Termination Notice" and the date of delivery of such notice, the "Investor Milestone Termination Date"), in which case, (A) the liquidated damages described above shall not continue to accrue for the time following the Investor Milestone Termination Date, (B) the escrow amount shall be returned to the Company (following the redemption of the Series B Preferred Stock described below, to the former holders thereof), and (C) the 28,413,000 Bonus Shares held in escrow shall be returned to Bonus.

As the Bonus Shares represent marketable securities with readily determinable fair value, Bonus shares issued to the Company were recognized upon initial recognition based on their quoted price (less applicable non-marketability discount) as of the date of the completion of the Bonus Agreements at an aggregate amount of $8,759. The difference between the fair value of Bonus shares and the amount of cash that was transferred directly to Bonus from an escrow account was recognized as financial liability, representing the Company's obligation to Bonus with respect to the LO2A Proceeds in an amount of $5,059 (see Note 2).

In addition, during the period from completion of the Bonus Agreements (February 19, 2020) and through September 30, 2020, the Company recognized financial income from revaluation of its investment in Bonus marketable securities in an amount of $644 (the Company recognized income of $1,000 for the six month period ended June 30, 2020, resulting in financial loss of $356 for the three month period ended September 30, 2020) due to the change in the quoted market price of these shares on TASE. Such amount was presented as part of financial income (expenses), net.

During the nine month period ended September 30, 2020, the Company received cash proceeds of $111 from the sale of 1,023,707 of Bonus Shares, which are marketable securities, in open market transactions.

The Mandatorily Redeemable Series B Investment

In order to finance the transactions contemplated by the Bonus Purchase Agreement, on January 9, 2020, the Company entered into a Securities Purchase Agreement (the "Series B Purchase Agreement") with certain accredited investors.

Pursuant to the Series B Purchase Agreement, the Company agreed to sell to the investors, and the investors agreed to purchase from the Company, in a private placement, an aggregate of 7,500 shares of newly created Series B Non-Voting Redeemable Preferred Stock, par value $0.001 per share, of the Company ("Series B Preferred Stock") for a purchase price of $1.00 per share, for aggregate gross proceeds under the Series B Purchase Agreement of $7,500, which funds were deposited into an escrow account, of which (i) $500 was to be paid to the Bonus Escrow Account and $100 was to be paid to the Company to cover certain of its transactions expenses, in each case, promptly following the execution of the Series B Purchase Agreement, and (ii) the remaining $6,900 was to be released to the Bonus Escrow Account upon the closing of the transactions contemplated by the Series B Purchase Agreement (of which, as described above, $3,200 was to be released upon the earlier of the Milestone Closing or upon written consent of the holders of at least a majority of the Series B Preferred Stock).

The Series B Purchase Agreement contained customary covenants, representations and warranties of the parties thereto, including, among others, (i) a covenant by the investors not to transfer the Series B Preferred Stock without the approval of the Company; (ii) a covenant by the Company, for as long as any Series B Preferred Stock remain outstanding, not to sell any Bonus Shares for a price per share equal to less than NIS 0.40 (the "Price Restriction"); and (iii) a covenant by the Company, simultaneously with, or promptly after, the redemption of the Series B Preferred Stock, to assign certain rights under the Bonus Purchase Agreement, such as the right to liquidated damages in the event of delayed Nasdaq Listing, and under the Bonus Registration Rights Agreement, to the investors.

In connection with the Series B Purchase Agreement, the Company agreed to file, at the closing, a Certificate of Designations of Series B Non-Voting Redeemable Preferred Stock with the Secretary of State of Delaware (the "Series B Certificate of Designations"). Pursuant to the Series B Certificate of Designations, the Company designated 7,500 shares of preferred stock as Series B Preferred Stock. The Series B Preferred Stock were not convertible into shares of Common Stock of the Company and have no voting powers, except as related to certain rights to protect the rights and preferences of the Series B Preferred Stock and with respect to sales or dispositions of the Series B Preferred Stock at a price per share below the Price Restriction. The Series B Preferred Stock entitled its holders to (i) 80% of the proceeds received by the Company through future sales of the Bonus Shares issued to the Company under the Bonus Agreements and (ii) 80% of any cash dividends received by the Company on such Bonus Shares. Under the Series B Certificate of Designations, the Company had the option to redeem the Series B Preferred Stock at any time by distributing to holders of the Series B Preferred Stock (i) 80% of the Bonus Shares then held by the Company and (ii) 80% of all dividends received by the Company but not yet paid to holders of the Series B Preferred Stock (the "Redemption Payment"). The Company was required to redeem the Series B Preferred Stock through payment of the Redemption Payment upon the earlier of (i) 60 days following the Nasdaq Listing of the Bonus Shares, and (ii) December 28, 2020.

However, until the completion of the Nasdaq Listing, an amount of $3,700 shall remain in an escrow account and, upon the failure of such listing by Bonus by the Milestone End Date, such amount shall be required to be released in its entirety to the Series B investors. This escrow account of $3,700 is presented as restricted deposit in the accompanying consolidated balance sheet as of September 30, 2020 and the same amount is reflected as part of the liability with respect to the mandatorily redeemable series B preferred Stock.

As of the completion date (February 19, 2020), the Company recognized a liability in light of its obligation to redeem the Series B Preferred Stock at its fair value in an amount of $10,707, representing the sum of the remaining escrow amount of $3,700 (which, in case the Milestone Closing will not be met, will be paid to the Series B investors) and 80% of the Company's investment in Bonus marketable shares, see Note 2.

The difference between the amount of the liability recognized with respect to the Series B Preferred Stock ($10,707) and the cash amount actually invested by such preferred stock investors ($7,500), amounting to $3,207 was recognized immediately as financial expense, net upon the completion of the Bonus agreement and the Series B Purchase Agreement, within financial income (loss), net.

In addition, from the date of the completion of the Bonus agreements and until September 30, 2020, the Company recognized a loss in an amount of $597 (the Company recognized a loss of $803 during the six month period ended June 30, 2020, resulting in a gain of $206 for the three month period ended September 30, 2020) as part of financial income (loss), net due to the revaluation of the mandatorily redeemable Series B Preferred Stock liability.

On July 8, 2020, the Company elected to redeem all of the Series B Preferred Stock. As a result, the Company distributed 68,191,200 Bonus Shares representing an amount of $6,597 to the holders of Series B Preferred Stock representing 80% of the Bonus shares then held by the Company. As a result of such distribution, as of the date of these financial statements, the Company owns the remaining 16,024,093 Bonus Shares, representing approximately 1.61% of the outstanding shares of Bonus. However, as of September 30, 2020, an amount of 9,546,768 Bonus Shares (out of the said 68,191,200 shares) to which several of the former holders of Series B Preferred Stock are entitled, are still held in the Company's bank account as the Company did not receive the required instructions as to the transfer of such Bonus Shares from such former holders. The said shares are presented in the balance sheet as an asset and a liability at the amount of $1,007.

The 2020 Loan

On July 15, 2020, OcuWize entered into a loan agreement with Bank Hapoalim (the "Bank"), whereby the Bank extended a loan in the principal amount of NIS 850,000 (approximately $247,000) (the "2020 Loan"), which is presented as a short term loan payable in the accompanying unaudited consolidated balance sheet as of September 30, 2020. The 2020 Loan bears interest at an annual rate of 5.45%, which will be paid in monthly payments. The 2020 Loan has a maturity date of January 15, 2021. In order to secure its obligations and performance pursuant to the 2020 Loan, OcuWize recorded a pledge in favor of the Bank and agreed that at all times, the value of all the assets in the OcuWize bank account will not be less than NIS 1,700,000 (approximately $496,000). In order to satisfy this requirement, the Company loaned to OcuWize a portion of the Bonus Shares held by it.