UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended September 30, 2004
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________________ to ________________
Commission File Number 333-106160
m-Wise, Inc.
(Exact name of small business issuer as specified in its charter)
Delaware 11-3536906
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Sapir Street, Herzeliya Pituach, Israel 46852
(Address of principal executive offices)
+972-9-9611212
(Issuer's telephone number, including area code)
All Correspondence to:
Arthur S. Marcus, Esq.
Gersten, Savage, Kaplowitz, Wolf & Marcus, LLP
101 E. 52 Street, 9th Floor
New York, New York 10022
(212) 752-9700
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No []
The number of shares outstanding of the issuer's common stock, as of November
15, 2004, was 69,506,898.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [X]
M-WISE, INC.
TABLE OF CONTENTS
Page
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements 1
Unaudited Balance Sheet as of September 30, 2004 2
Unaudited Statements of Operations for the Three Months
Ended and Nine Months Ended September 30, 2004 and 2003 3-7
Unaudited Statements of Cash Flows for the Nine Months
Ended September 30, 2004 and 2003 8
Notes to Unaudited Financial Statements 9-22
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 23-26
Item 3. Controls and Procedures 27
PART II
OTHER INFORMATION
Item 1 Legal Proceedings 27
Item 2 Changes in Securities and Small Business
Issuer Purchases of Equity Securities 27
Item 3 Defaults upon Senior Securities 27
Item 4 Submission of Matters to a Vote of Security Holders 27
Item 5 Other Information 27
Item 6 Exhibits and Reports on Form 8-K 25-29
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
M-WISE, INC.
CONSOLIDATED FINANCIAL STATEMENTS
PERIODS ENDED SEPTEMBER 30, 2004 AND 2003
CONTENTS
Report of Independent Registered Public Accounting Firm 1
Consolidated Balance Sheet 2
Consolidated Statements of Operations 3-4
Consolidated Statement of Changes in Stockholders' Equity 5
Schedules of Expenses 6-7
Consolidated Statement of Cash Flows 8
Notes to Consolidated Financial Statements 9-23
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of M-WISE, INC.
We have reviewed the accompanying consolidated balance sheets of m-Wise,
Inc. and subsidiaries (the "Company") as of September 30, 2004 and 2003, and the
related consolidated statements of deficit, operations, change in stockholders'
equity and cash flows for the nine month periods then ended. These interim
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards of the Public
Company Accounting Oversight Board (United States). A review of interim
financial information consists primarily of applying analytical procedures and
making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit conducted in accordance with
standards of the Public Company Accounting Oversight Board (United States), the
objective of which is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the consolidated interim financial statements referred to
above for them to be in conformity with accounting principles generally accepted
in the United States of America.
"SF PARTNERSHIP, LLP"
TORONTO, CANADA CHARTERED ACCOUNTANTS
November 5, 2004
-1-
M-WISE, INC.
Balance Sheets
September 30, 2004 and 2003
2004 2003
----------- -----------
ASSETS
CURRENT
Cash and cash equivalents $ 52,827 $ 16,000
Accounts receivable - trade (net of allowance for doubtful
accounts of $17,629; 2003 - $47,937) 218,344 129,656
Other receivables 2,974 26,613
Prepaid and sundry assets 11,783 30,037
----------- -----------
285,928 202,306
LONG-TERM PREPAID EXPENSES 12,467 3,437
EQUIPMENT 242,418 332,754
DEFERRED FINANCING FEES 41,051 63,152
----------- -----------
$ 581,864 $ 601,649
=========== ===========
LIABILITIES
CURRENT
Bank indebtedness $ 15,571 $ 13,729
Trade accounts payable 215,502 1,225,094
Other payables and accrued liabilities 654,820 659,858
Deferred revenue 396,062 55,786
Notes payable - current portion 71,000 --
----------- -----------
1,352,955 1,954,467
ACCRUED SEVERANCE PAY (note 3) 16,238 22,311
NOTES PAYABLE (note 4) 1,790,997 1,807,988
REDEEMABLE PREFERRED SHARES (note 5) -- 5,100,304
3,160,190 8,885,070
----------- -----------
STOCKHOLDERS' DEFICIENCY
CAPITAL STOCK (note 6) $ 118,162 $ 84,980
PAID IN CAPITAL 6,889,881 1,729,682
ACCUMULATED OTHER COMPREHENSIVE LOSS -- (127,529)
ACCUMULATED DEFICIT (9,586,369) (9,970,554)
----------- -----------
(2,578,326) (8,283,421)
----------- -----------
$ 581,864 $ 601,649
=========== ===========
APPROVED ON BEHALF OF THE BOARD
"SHAY BEN ASULIN" "MORDECHAI BROUDO"
DIRECTOR DIRECTOR
-2-
M-WISE, INC.
Consolidated Statement of Operations
Nine Months Ended September 30, 2004 and 2003
2004 2003
SALES $ 1,134,179 $ 316,352
COST OF SALES 173,002 110,716
------------ ------------
GROSS PROFIT 961,177 205,636
------------ ------------
EXPENSES
General and administrative (page 6) 782,634 1,069,930
Research and development (page 6) 268,068 219,124
Financial 15,080 39,066
Redemption premium on Class B preferred shares (note 5) -- 300,000
------------ ------------
1,065,782 1,628,120
------------ ------------
LOSS BEFORE DISCONTINUED OPERATIONS (104,605) (1,422,484)
Loss on discontinued operations -- 205,543
------------ ------------
NET LOSS $ (104,605) $ (1,628,027)
============ ============
BASIC LOSS PER SHARE
BEFORE DISCONTINUED OPERATIONS $ 0.00 (0.13)
============ ============
BASIC LOSS PER SHARE $ 0.00 (0.14)
============ ============
FULLY DILUTED LOSS PER SHARE
BEFORE DISCONTINUED OPERATIONS $ 0.00 (0.13)
============ ============
FULLY DILUTED LOSS PER SHARE (note 6) $ 0.00 (0.14)
============ ============
BASIC WEIGHTED AVERAGE NUMBER OF SHARES 69,506,898 11,260,428
============ ============
-3-
M-WISE, INC.
Consolidated Statement of Operations
Three Months Ended September 30, 2004 and 2003
2004 2003
SALES $ 900,501 $ 78,481
COST OF SALES 125,628 27,461
------------ ------------
GROSS PROFIT 774,873 51,020
------------ ------------
EXPENSES
General and administrative (page 7) 241,261 217,386
Research and development (page 7) 129,093 (9,605)
Financial 4,415 14,237
Redemption premium on Class B preferred shares (note 5) -- 100,000
------------ ------------
374,769 322,018
------------ ------------
EARNINGS (LOSS) BEFORE DISCONTINUED OPERATIONS 400,104 (270,998)
Loss on discontinued operations -- 87,437
============ ============
NET EARNINGS (LOSS) $ 400,104 $ (358,435)
============ ============
BASIC EARNINGS (LOSS) PER SHARE
BEFORE DISCONTINUED OPERATIONS $ 0.01 (0.02)
============ ============
BASIC EARNINGS (LOSS) PER SHARE $ 0.01 (0.03)
============ ============
FULLY DILUTED EARNINGS (LOSS) PER SHARE
BEFORE DISCONTINUED OPERATIONS $ 0.01 (0.02)
============ ============
FULLY DILUTED EARNINGS (LOSS) PER SHARE (note 6) $ 0.01 (0.03)
============ ============
BASIC WEIGHTED AVERAGE NUMBER OF SHARES 69,506,898 11,260,428
============ ============
-4-
M-WISE, INC.
Consolidated Statement of Stockholders' Equity
Nine Months Ended September 30, 2004 and 2003
COMMON SHARES PREFERRED SHARES ACCUMULATED
OTHER
NUMBER OF NUMBER OF COMPREHENSIVE
SHARES $ SHARES $ LOSS
------------------------------------------------------------------------------------
Balance, January 1, 2003 5,260,428 8,943 268,382 2,684 (177,773)
Shares issued for offering
costs 25,786,896 42,978 -- -- --
Shares issued for offering
costs forfeited (19,786,896) -- -- -- (157,222)
7,025,778 warrants issued for
deferral of debt for legal
services rendered -- -- -- -- --
Class "C" shares issued for
obtaining line of credit -- -- 6,315,258 63,153 --
Options vested for employee
services -- -- -- -- --
Financial statement translation -- -- -- -- 50,244
Net loss -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Balance, September 30, 2003 11,260,428 19,143 6,583,640 65,837 (127,529)
============== ============== ============== ============== ==============
Balance, January 1, 2004 69,506,898 118,162 -- -- --
Options vested for employee
services -- -- -- -- --
Net Loss -- -- -- -- --
-------------- -------------- -------------- -------------- --------------
Balance, September 30, 2004 69,506,898 118,162 -- -- --
============== ============== ============== ============== ==============
ADDITIONAL
PAID IN ACCUMULATED
CAPITAL DEFICIT
-----------------------------------
Balance, January 1, 2003 $ 1,297,374 $ (8,342,527)
Shares issued for offering
costs 207,022 --
Shares issued for offering
costs forfeited --
7,025,778 warrants issued for
deferral of debt for legal
services rendered 10,000 --
Class "C" shares issued for
obtaining line of credit -- --
Options vested for employee
services 372,508 --
Financial statement translation -- --
Net loss -- (1,628,027)
-------------- --------------
Balance, September 30, 2003 $ 1,729,682 $ (9,970,554)
============== ==============
Balance, January 1, 2004 $ 6,869,184 $ (9,481,764)
Options vested for employee
services 20,697 --
Net Loss -- (104,605)
-------------- --------------
Balance, September 30, 2004 $ 6,889,881 $ (9,586,369)
============== ==============
-5-
M-WISE, INC.
Schedule of Expenses
Nine Months Ended September 30, 2004 and 2003
2004 2003
GENERAL AND ADMINISTRATIVE
Consulting $ 317,855 $ 464,078
Professional services 55,304 271,324
Other expenses 82,205 32,870
Communications 94,365 52,740
Marketing 48,902 --
Travel 104,783 4,000
Payroll and related expenses 53,256 206,253
Rent 12,676 18,105
Bad debts 2,436 15,193
Depreciation 10,852 5,367
----------- -----------
$ 782,634 $ 1,069,930
=========== ===========
RESEARCH AND DEVELOPMENT
Payroll and related expenses $ 150,399 $ 129,894
Depreciation 77,011 67,597
Travel 45,459 31,873
Vehicle maintenance 36,545 44,158
Subcontractors 7,529 40,580
Materials and components 3,092 16,828
Shipment and freight 203 --
Government grant (note 7) (52,170) (111,806)
----------- -----------
$ 268,068 $ 219,124
=========== ===========
-6-
M-WISE, INC.
Schedule of Expenses
Three Months Ended September 30, 2004 and 2003
2004 2003
GENERAL AND ADMINISTRATIVE
Consulting $ 104,754 $ 80,491
Professional services 659 37,995
Other expenses 17,422 9,383
Communications 45,177 17,896
Marketing 14,231 19,461
Travel 32,223 --
Payroll and related expenses 18,593 29,166
Rent 2,118 6,010
Bad debts 2,436 --
Vehicle maintenance -- 15,193
Depreciation 3,648 1,791
------------ ------------
$ 241,261 $ 217,386
============ ============
RESEARCH AND DEVELOPMENT
Payroll and related expenses $ 67,750 $ 15,291
Depreciation 25,895 20,390
Travel 16,180 2,711
Vehicle maintenance 11,342 2,550
Subcontractors 6,637 (3,212)
Materials and components 1,107 8,568
Shipment and freight 182 --
Government grant (note 7) -- (55,903)
------------ ------------
$ 129,093 $ (9,605)
============ ============
-7-
M-WISE, INC.
Consolidated Statement of Cash Flows
Nine Months Ended September 30, 2004 and 2003
2004 2003
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (104,605) $(1,628,027)
Adjustments required to reconcile net loss to net cash used in operating
activities:
Depreciation 87,863 72,964
Increase in redemption premium on Class B preferred shares -- 300,000
Common shares issued for offering costs -- 60,000
Warrants issued for deferral of debt for legal services rendered -- 10,000
Wages and salaries paid by options 20,697 372,508
Accounts receivable - trade (168,378) (4,837)
Other receivables 12,702 66,796
Prepaid and sundry assets 459 (13,562)
Deferred revenue 340,276 55,786
Trade accounts payable 17,284 176,303
Other payables and accrued liabilities (130,011) 256,394
Long-term prepaid expenses (5,168) 13,581
Deferred financing fees 9,471 (63,152)
Accrued severance pay (4,435) 734
----------- -----------
76,155 (324,512)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of equipment (73,907) --
Proceeds from disposition of equipment -- 116,643
----------- -----------
(73,907) 116,643
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Increase in notes payable 22,438 --
Bank indebtedness - gross (4,397) 7,890
----------- -----------
18,041 7,890
----------- -----------
FOREIGN EXCHANGE LOSS ON CASH AND CASH EQUIVALENTS -- 404
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 20,289 (199,575)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 32,538 215,575
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 52,827 $ 16,000
=========== ===========
-8-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
1. DESCRIPTION OF BUSINESS AND GOING CONCERN
a) Description of Business
m-Wise Inc. (the "Company") is a U.S. corporation which develops
interactive messaging platforms for mobile phone-based commercial
applications, transactions and information services with internet billing
capabilities.
The Company has a wholly-owned subsidiary in Israel, which was
incorporated in 2000 under the laws of Israel.
b) Going Concern
The Company's financial statements are presented on a going concern basis,
which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The Company has experienced
recurring losses since inception and has negative cash flows from
operations that raise substantial doubt as to its ability to continue as a
going concern. For the periods ended September 30, 2004 and 2003, the
Company experienced net losses of $104,605 and $1,628,027 respectively.
The Company is in an industry where operational fluctuation is usually
higher than other ordinary industries. The accompanying financial
statements reflect management's current assessment of the impact to date
of the economic situation on the financial position of the Company. Actual
results may differ materially from management's current assessment.
The Company's ability to continue as a going concern is also contingent
upon its ability to secure additional financing, continuing sale of its
products and attaining profitable operations.
Management is pursuing various sources of equity financing. Although the
Company plans to pursue additional financing, there can be no assurance
that the Company will be able to secure financing when needed or obtain
such on terms satisfactory to the Company, if at all.
The financial statements do not include any adjustments to reflect the
possible future effects on the recoverability and classification of assets
or the amounts and classification of liabilities that may result from the
possible inability of the Company to continue as a going concern.
-9-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company are in accordance with U.S.
generally accepted accounting principles, and their basis of application
is consistent with that of the previous period. Outlined below are those
policies considered particularly significant:
a) Basis of Presentation
These unaudited interim financial statements reflect all adjustments
that are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented.
b) Reporting Currency
A majority of the Company's revenues are generated in U.S. dollars.
In addition, a substantial portion of the Company's costs are
incurred in U.S. dollars. Management has determined that the U.S.
dollar will be used as the Company's functional and reporting
currency.
Accordingly, financial statements of subsidiaries maintained in
currencies other than the reporting currency are being translated
into U.S. dollars in accordance with Statement of Financial
Accounting Standard No. 52 (SFAS 52), "Foreign Currency
Translation". All translation gains and losses are directly
reflected separately in stockholders' equity as Accumulated Other
Comprehensive Income or Loss.
Foreign currency transactions of subsidiaries have been translated
to their functional currencies at the rate prevailing at the time of
the transaction. Realized foreign exchange gains and losses have
been charged to income in the year.
During the 2003 fiscal year, the subsidiaries whose reporting
currency was other than US dollars were disposed and as such, the
accumulated other comprehensive loss was adjusted to nil.
c) Cash and Cash Equivalents
Cash includes currency, cheques issued by others, other currency
equivalents, current deposits and passbook deposits. Cash
equivalents include securities and short-term money market
instruments that can be easily converted into cash. The investments
that mature within three months from the investment date are also
included as cash equivalents.
d) Allowance for Doubtful Accounts
The allowance for doubtful accounts reflects managements' best
estimate of probable losses inherent in the accounts receivable
balance. The Company determines the allowance based on known
troubled accounts, historical experience, and other currently
available evidence.
-10-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
e) Deferred Financing Fees
Deferred financing fees relate to a non-interest bearing credit line
facility of $300,000 provided by a shareholder as disclosed in note
6. The overdraft from the credit facility will be non-interest
bearing and there will be no covenants with which the Company will
need to comply. The credit line facility has no expiration date and
management expects to retain the facility for a period of at least
five years. Accordingly, the fees are being amortized using the
straight-line method over five years.
f) Equipment and Depreciation
Equipment are stated at cost less accumulated depreciation.
Depreciation is based on the estimated useful lives of the assets
and is provided using the undernoted annual rates and methods:
Furniture and equipment 6-15% Straight-line
Computer equipment 33% Straight-line
g) Accrued Severance
The Company accounts for its potential severance liability of its
Israel subsidiary in accordance with EITF 88-1, "Determination of
Vested Benefit Obligation for a Defined Benefit Pension Plan". The
Company's liability for severance pay is calculated pursuant to
applicable labour laws in Israel on the most recent salary of the
employees multiplied by the number of years of employment as of the
balance sheet date for all employees. The Company's liability is
fully accrued and reduced by monthly deposits with severance pay
funds and insurance policies.
h) Revenue Recognition
The Company generates revenues from product sales, licensing,
customer services and technical support.
-11-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
Revenues from products sales are recognized on a completed-contract
basis, in accordance with Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements" ("SAB No. 101"), Statement of
Position 97-2 "Software Revenue Recognition" and Statement of
Position 81-1 "Accounting for Performance of Construction-Type and
Certain Production-Type Contracts". The Company has primarily
short-term contracts whereby revenues and costs in the aggregate for
all contracts is expected to result in a matching of gross profit
with period overhead or fixed costs similar to that achieved by use
of the percentage-of-completion method. Accordingly, financial
position and results of operations would not vary materially from
those resulting from the use of the percentage-of-completion method.
Revenue is recognized only after all three stages of deliverables
are complete; installation, approval of acceptance test results by
the customer and when the product is successfully put into real-life
application. Customers are billed, according to individual
agreements, a percentage of the total contract fee upon completion
of work in each stage; approximately 40% for installation, 40% upon
approval of acceptance tests by the customer and the balance of the
total contract price when the software is successfully put into
real-life application. The revenues, less its' associated costs, are
deferred and recognized on completion of the contract and customer
acceptance. Amounts received for work performed in each stage are
not refundable.
On-going service and technical support contracts are negotiated
separately at an additional fee. The technical support is separate
from the functionality of the products, which can function without
on-going support.
Technology license revenues are recognized in accordance with SAB
No. 101 at the time the technology and license is delivered to the
customer, collection is probable, the fee is fixed and determinable,
a persuasive evidence of an agreement exists, no significant
obligation remains under the sale or licensing agreement and no
significant customer acceptance requirements exist after delivery of
the technology.
Revenues relating to customer services and technical support are
recognized as the services are rendered ratably over the period of
the related contract.
The Company does not sell products with multiple deliverables. It is
management's opinion that EITF 00-21, "Revenue Arrangements With
Multiple Deliverables" is not applicable.
i) Research and Development Costs
Research and development costs are expensed as incurred.
-12-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
j) Government Grants
Government grants are recognized as income over the periods
necessary to match them with the related costs that they are
intended to compensate.
k) Use of Estimates
Preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect
the amounts reported in the financial statements and related notes
to financial statements. These estimates are based on management's
best knowledge of current events and actions the Company may
undertake in the future. Actual results may ultimately differ from
estimates, although management does not believe such changes will
materially affect the financial statements in any individual year.
l) Concentration of Credit Risk
SFAS No. 105, "Disclosure of Information About Financial Instruments
with Off-Balance Sheet Risk and Financial Instruments with
Concentration of Credit Risk", requires disclosure of any
significant off-balance sheet risk and credit risk concentration.
The Company does not have significant off-balance sheet risk or
credit concentration. The Company maintains cash and cash
equivalents with major Israel financial institutions.
The Company's provides credit to its clients in the normal course of
its operations. Depending on their size, financial strength and
reputation, customers are given credit terms of up to 60 days. The
Company carries out, on a continuing basis, credit checks on its
clients and maintains provisions for contingent credit losses which,
once they materialize, are consistent with management's forecasts.
For other debts, the Company determines, on a continuing basis, the
probable losses and sets up a provision for losses based on the
estimated realizable value. For the periods ended September 30, 2004
and 2003, all uncollectible amounts have been written off and there
was no further provision for doubtful accounts.
Concentration of credit risk arises when a group of clients having a
similar characteristic such that their ability to meet their
obligations is expected to be affected similarly by changes in
economic or other conditions. The Company does not have any
significant risk with respect to a single client.
-13-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)
m) Fair Value of Financial Instruments
The estimated fair value of financial instruments has been
determined by the Company using available market information and
valuation methodologies. Considerable judgment is required in
estimating fair value. Accordingly, the estimates may not be
indicative of the amounts the Company could realize in a current
market exchange. At September 30, 2004 and 2003, the carrying
amounts of cash equivalents, short-term bank deposits, trade
receivables and trade payables approximate their fair values due to
the short-term maturities of these instruments.
3. ACCRUED SEVERANCE PAY
The Company accounts for its potential severance liability of its Israel
subsidiary in accordance with EITF 88-1, "Determination of Vested Benefit
Obligation for a Defined Benefit Pension Plan". The Company's liability
for severance pay is calculated pursuant to applicable labour laws in
Israel on the most recent salary of the employees multiplied by the number
of years of employment as of the balance sheet date for all employees. The
Company's liability is fully accrued and reduced by monthly deposits with
severance pay funds and insurance policies. As at September 30, 2004 and
2003, the amount of the liabilities accrued were $54,046 and $53,197
respectively. Severance pay expenses for the periods ended September 30,
2004 and 2003 were $874 and $2,517 respectively.
The deposit funds include profits accumulated up to the balance sheet date
from the Israeli company. The deposited funds may be withdrawn only upon
the fulfillment of the obligation pursuant to Israeli severance pay laws
or labour agreements. Cash surrender values of the deposit funds as at
September 30, 2004 and 2003 were $37,808 and $30,886 respectively. Income
earned from the deposit funds for 2004 and 2003 was immaterial.
4. NOTES PAYABLE
2004 2003
Syntek Capital AG - a significant shareholder until July 2002 $ 900,000 $ 900,000
DEP Technology Holdings Ltd. - a significant shareholder
until July 2002 900,000 900,000
Accrued interest 61,997 7,988
-------------- --------------
1,861,997 1,807,988
Less: Current portion 71,000 --
-------------- --------------
$ 1,790,997 $ 1,807,988
============== ==============
-14-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
4. NOTES PAYABLE (cont'd)
The promissory notes are unsecured, bear interest at the per annum LIBOR
rate offered by Citibank North America and are repayable on December 31,
2007. Commencing January 1, 2004, the annual principal repayments are
calculated as a total of 5% of annual prior year's revenues.
Under the loan agreements, the Company is not allowed to declare dividends
except for the purpose of redemption of common stock owned by Ogen LLC,
one of the stockholders of the Company.
The Company may not create a pledge, charge or other encumbrance over any
or all of its assets for financing without the lenders' consent and must
provide notice to the lender at least 10 days prior to any such action.
5. REDEEMABLE PREFERRED SHARES
The Company has issued Series "B" preferred shares, redeemable at the
option of the holder at a price equal to $8.17 per share plus 10% per
annum from the date of purchase through the redemption date.
The Company recorded the transaction in accordance with EITF D-98,
"Classification and Measurement of Redeemable securities". As such, the
preference shares have been presented outside of permanent equity at its
redemption value. The premium on redemption is being charged to the
statement of operations as incurred.
On November 19, 2003, the Company, in accordance with the holders, agreed
to convert 489,456 Series "B" preferred shares into 3,124,105 common
shares at a ratio of 1 to 6.3828125. Following the conversion, the common
shares were split on a 1 to 6 basis to 18,744,630 common shares as
described in note 6.
-15-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
6. CAPITAL STOCK
Authorized
210,000,000 Common shares
170,000,000 Preferred shares
Series "A": convertible, voting, par value of $0.0017 per share
Series "B": 10% non-cumulative dividend, redeemable, convertible, voting, par
value of $0.0017 per share
Series "C": 10% non-cumulative dividend, convertible, voting, par value of
$0.0017 per share
2004 2003
Issued
69,506,898 Common shares (2003 - 11,260,428) $ 118,162 $ 19,143
nil Series "A" Preferred shares (2003 - 268,382) -- 2,684
nil Series "C" Preferred shares (2003 - 6,315,258) -- 63,153
------------ ------------
$ 118,162 $ 84,980
============ ============
On November 19, 2003, the Company, in accordance with the holders, agreed to
convert all the 268,382 Class "A" and 489,456 Class "B" and 6,315,258 Class "C"
preferred shares into common shares. Following the conversion, the Company
granted a 1 to 6 forward stock split of its common shares. The conversion has
been recorded prospectively in the consolidated financial statements, while the
forward stock split has been recorded retroactively.
Stock warrants and options:
The Company accounted for its stock options and warrants in accordance with SFAS
123 "Accounting for Stock - Based Compensation" and SFAS 148 "Accounting for
Stock - Based compensation - Transition and Disclosure." Value of options
granted has been estimated by the Black Scholes option pricing model. The
assumptions are evaluated annually and revised as necessary to reflect market
conditions and additional experience. The following assumptions were used:
2004 2003
Israel International Israel International
Interest rate 5% 5% 5% 5%
Expected volatility 50% 50% 50% 50%
Expected life in years 8 10 8 10
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M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
6. CAPITAL STOCK (cont'd)
Warrants:
In April 2000, 56,180 warrants, equivalent to 337,080 after the 1 to 6
forward stock split, were issued to one of the shareholders with his
preferred Class "A" shares for a total investment of $750,000. Warrants
will expire in the event of an initial public offering of the Company's
securities. Warrants have an exercise price for preferred Class "A" shares
of the Company at $4.45 per share, equivalent to $0.74 after the 1 to 6
forward stock split. No value has been assigned to the warrants and the
total investment net of par value of preferred Class "A" shares has been
presented as additional paid in capital. The warrants for preferred Class
"A" shares were converted into warrants for common shares on a 1 to 1
basis during the year.
In January 2003, the Company issued 180,441 warrants for the Class "B"
preferred shares of the Company for deferral of debt for legal services
rendered, which was valued at $10,000. The Warrants will expire in 2010.
The warrants for preferred Class "B" shares have been converted into
warrants for common shares during the year at a ratio of 1 to 6.3828125.
After the conversion, the warrants were further split at the ratio of 1 to
6 in accordance with the forward stock split of the common shares. After
the conversion and the forward split, there were 7,025,778 warrants
outstanding each convertible to 1 common share at par value.
Capital Stock:
In January 2003, the Company issued 4,297,816 common shares, equivalent to
25,786,896 after the 1 to 6 forward stock split, for $250,000 of offering
costs with regard to the registration of its securities with the
Securities Exchange Commission. In November 2003 it was agreed upon by the
parties that the fair value of the offering costs was only $60,000 and
therefore 19,786,896 of the post-split shares were forfeited. The offering
costs have been charged to professional services expense in the year. The
cancellation has been reflected retroactively in the interim financial
statements.
In January 2003, the Company issued 6,315,258 Class "C" preferred shares
to a shareholder for providing a non-interest bearing credit line facility
of $300,000. These shares were issues at par value, which approximates the
fair market value of the financing fees relating to the credit line
facility. At September 30, 2004 the line of credit has not been utilized.
The 6,315,258 Class "C" preferred shares were subsequently converted into
37,891,548 common shares post forward stock split.
-17-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
6. CAPITAL STOCK (cont'd)
Stock Options:
In February 2001 the Board of Directors of the Company adopted two option
plans to allow employees and consultants to purchase ordinary shares of
the Company.
Under the Israel 2001 share option plan management authorized stock
options for 2,403,672 common shares of the Company having a $0.0017
nominal par value each and an exercise price of $0.0017, and under the
International 2001 share option plan, stock options for 300,000 common
shares having a $0.0017 nominal par value each and an exercise price of
$0.0017. As of September 30, 2004, 3,672 options under the Israel 2001
share option plan for common stock were not yet granted.
Under the Israel 2003 share option plan management authorized stock
options (on a post conversion, post split basis) for 16,094,106 preferred
Class "B" shares, which were converted to options for common shares of the
Company having a $0.0017 nominal par value each and an exercise price of
$0.0017, and under the International 2003 share option plan stock options
(on a post conversion, post split basis) for 25,061,094 preferred Class
"B" shares which were converted to options for common shares of the
Company having a $0.0017 nominal par value each and an exercise price of
$0.0017. As of September 30, 2004, 38,256 options under the Israel 2003
share option plan were not yet granted.
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M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
6. CAPITAL STOCK (cont'd)
The options vest gradually over a period of 4 years from the date of grant
for Israel and 10 years (no less than 20% per year for five years for
options granted to employees) for the International plan. The term of each
option shall not be more than 8 years from the date of grant in Israel and
10 years from the date of grant in the International plan. The outstanding
options that have vested have been expensed in the statements of
operations as follows:
Year ended December 31, 2001 $ 9,000
Year ended December 31, 2002 --
Year ended December 31, 2003 384,889
Quarter ended March 31, 2004 8,269
Quarter ended June 30, 2004 6,214
Quarter ended September 30, 2004 6,214
----------------
$ 414,586
================
The following table summarizes the activity of common stock options during
2004 and 2003:
2004 2003
Israel International Israel International
------------ ------------ ------------ ------------
Outstanding, beginning of period 18,455,850 25,361,094 600,000 300,000
Granted -- -- 1,800,000 --
Exercised -- -- -- --
Cancelled -- -- -- --
------------ ------------ ------------ ------------
Outstanding, end of period 18,455,850 25,361,094 2,400,000 300,000
------------ ------------ ------------ ------------
Weighted average fair value of common
stock options granted during the
period $ -- $ -- $ 18,000 $ --
============ ============ ============ ============
Weighted average exercise price of
common stock options, beginning of
period $ 0.0017 $ 0.0017 $ 0.0017 $ 0.0017
============ ============ ============ ============
Weighted average exercise price of
common stock options granted in the
period $ -- $ -- $ 0.0017 $ --
============ ============ ============ ============
Weighted average exercise price of
common stock options, end of per $ 0.0017 $ 0.0017 $ 0.0017 $ 0.0017
============ ============ ============ ============
Weighted average remaining contractual
life of common stock options 7 years 9 years 8 years 10 years
============ ============ ============ ============
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M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
6. CAPITAL STOCK (cont'd)
The following table summarizes the activity of preferred stock options
during 2004 and 2003:
2004 2003
Israel International Israel International
Outstanding, beginning of period -- -- -- --
Granted -- -- 16,055,850 25,061,094
Exercised -- -- -- --
Preferred stock options converted
to common -- -- -- --
Cancelled -- -- -- --
-------------- -------------- -------------- --------------
Outstanding, end of period -- -- 16,055,850 25,061,094
============== ============== ============== ==============
Weighted average fair value of preferred
stock options granted during the period $ -- $ -- $ 27,360 $ 42,604
============== ============== ============== ==============
Weighted average exercise price of
preferred stock options, beginning of
period $ -- $ -- $ -- $ --
============== ============== ============== ==============
Weighted average exercise price of
preferred stock options granted in the
period $ -- $ -- $ 0.0017 $ 0.0017
============== ============== ============== ==============
Weighted average exercise price of
preferred stock options, end of period $ -- $ -- $ 0.0017 $ 0.0017
============== ============== ============== ==============
Weighted average remaining contractual
life of preferred stock options 8 years 10 years
============== ============== ============== ==============
All outstanding preferred stock options have been cancelled and replaced
with common stock options during the 2003 fiscal year at the ratio of 1 to
6.3828125.
The stock options and the preferred shares have not been included in the
calculation of the diluted earnings per share as their inclusion would be
antidilutive.
-20-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
7. GOVERNMENT GRANTS
During the period ended September 30, 2004 the Israeli subsidiary received
approximately $52,000 from a joint Israeli-Singapore government grant
program. The amount is being recorded as a reduction of the research and
development expense incurred in the period. The total amount approved for
the grant was $186,330, which the Company is recording on a cash basis.
The Israeli subsidiary is required to repay the government agency
royalties in the amount of 2.5% of gross sales from the products and
services being developed relating to the grant, limited to the amount of
the grant. If the product is not marketable, the grant will not be repaid.
As at September 30, 2004 the products have been developed but no sales
have been made. As such, no amount has been paid as royalties.
8. INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes". This Standard prescribes the use of the
liability method whereby deferred tax asset and liability account balances
are determined based on differences between financial reporting and tax
bases of assets and liabilities and are measured using the enacted tax
rates. The effects of future changes in tax laws or rates are not
anticipated.
Under SFAS No. 109 income taxes are recognized for the following: a)
amount of tax payable for the current year, and b) deferred tax
liabilities and assets for future tax consequences of events that have
been recognized differently in the financial statements than for tax
purposes. Management determined that accounting values of its assets and
liabilities recorded are not materially different from their tax values
and therefore no deferred tax assets/liabilities have been setup to
account for the temporary differences.
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M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
8. INCOME TAXES (cont'd)
The Israeli subsidiary maintains an investment program in hardware and
software in the amount of $75,000 and has been granted the status of
"Approved Enterprise" under the Law for the Encouragement of Capital
Investments, 1959 in Israel. This status entitles the Company to an
exemption from tax on income derived there from for a period of 10 years
starting in the year in which the Company first generates taxable income,
but not later than 14 years from the date of approval which was received
on December 2002 or 12 years from commencement of operations. The
tax-exempt profits that will be earned by the Company's "Approved
Enterprises" can be distributed to shareholders, without imposing tax
liability on the Company only upon its complete liquidation. If these
retained tax-exempt profits are distributed in a manner other than in the
complete liquidation of the Company they would be taxed at the corporate
tax rate applicable to such profits as if the Company had not elected the
alternative system of benefits (depending on the level of foreign
investment in the Company) currently between 10% to 25% for an "Approved
Enterprise". Under SFAS 109, a deferred tax liability normally would be
recorded relating to taxes that would be owed on the distribution of
profits even if management does not intend currently to declare dividends.
As at September 30, 2004 the Israel subsidiary has not reported any
taxable income and there was an accumulated deficit of approximately
$250,000. There was no deferred tax liability to be recorded in the
period.
The Company has deferred income tax assets as follows:
2004 2003
Deferred income tax assets
Non-capital losses carried forward $ 2,400,000 2,500,000
Valuation allowance for deferred income tax assets (2,400,000) (2,500,000)
----------- -----------
$ -- --
=========== ===========
The Company provided a valuation allowance equal to the deferred income
tax assets because it is not presently more likely than not that they will
be realized.
The Company has accumulated tax losses in all of its subsidiaries. It is
not likely that the Company will be able to generate income to utilize the
tax loss. Therefore, no deferred tax assets have been set up to record the
tax benefits.
As at September 30, 2004, the Company has approximately $9,350,000 and
$250,000 tax losses carried forward in its United States and Israeli
subsidiaries. Losses in the United States subsidiary, if not utilized,
will expire in twenty years from the year of origin, December 31, 2020 to
December 31, 2024. For the Israel subsidiary, the losses can be carried
forward indefinitely to reduce income taxes on future taxable income.
-22-
M-WISE, INC.
Notes to Financial Statements
September 30, 2004 and 2003
9. RELATED PARTY TRANSACTIONS
During the period the Company incurred directors consulting fees and
salaries in the amount of $180,000 (2003, $180,000). At September 30, 2004
and 2003, the amounts were unpaid and included in other payables and
accrued expenses.
These transactions were in the normal course of business and recorded at an
exchange value established and agreed upon by the above mentioned parties.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operation
The following discussion should be read in conjunction with our consolidated
financial statements and related notes included elsewhere in this Report.
This filing contains forward-looking statements. The words "anticipate,"
"believe," "expect, "plan," "intend," "seek," "estimate," "project," "will,"
"could," "may," and similar expressions are intended to identify forward-looking
statements. These statements include, among others, information regarding future
operations, future capital expenditures, and future net cash flow. Such
statements reflect our management's current views with respect to future events
and financial performance and involve risks and uncertainties, including,
without limitation: (a) the timing of our sales could fluctuate and lead to
performance delays; (b) without additional equity or debt financing we cannot
carry out our business plan; (c) our stockholders have pre-emptive rights to
purchase securities of m-Wise , Which could impair our ability to raise capital;
(d) we operate internationally and are subject to currency fluctuations , which
could cause us to incur losses even if our operations are profitable; (e) we are
dependent upon certain major customers , and the loss of one or more of such
customers could adversely affect our revenues and profitability; (f) our
research and development facilities are located in Israel and we have important
facilities and resources located in Israel which could be negatively affected
due to military or political tensions; (g) certain of our officers and employees
are requires to serve in the Israel defense forces and this could force them to
be absent from our business for extended periods; (h) the rate of inflation in
Israel may negatively impact our costs if it exceeds the rate of devaluation of
the NIS against the Dollar. Should one or more of these risks or uncertainties
occur, or should underlying assumptions prove to be incorrect, actual results
may vary materially and adversely from those anticipated, believed, estimated or
otherwise indicated. These forward-looking statements speak only as of the date
of this prospectus. Subject at all times to relevant federal and state
-23-
M-WISE, INC.
securities law disclosure requirements, we expressly disclaim any obligation or
undertaking to disseminate any update or revisions to any forward-looking
statement contained herein to reflect any change in our expectations with regard
thereto or any changes in events, conditions or circumstances on which any such
statement is based. Consequently, all of the forward-looking statements made in
this Report are qualified by these cautionary statements and there can be no
assurance of the actual results or developments.
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED WITH THE NINE MONTHS ENDED
SEPTEMBER 30, 2003.
REVENUES
License fees and products. Revenues from license fees and products increased
372% to $695,787 for the nine months ended September 30, 2004 from $147,450 for
the same
period in 2003. the increase primarily consisted of $605,000 revenues derived
from our contract with Unefon S.A.
Revenue share. Revenues from revenue share decreased 20% to $15,143 for the nine
months ended September 30, 2004 from $18,876 for the same period in 2003.
Customer services and technical support. Revenues from customer services and
technical support increased 182% to $423,249 for the nine months ended September
30, 2004 from $150,026 for the same period in 2003. The increase primarily
consisted of revenues from ongoing customers who were not our customers during
the first nine months of 2003.
Cost of revenues
Customer services and technical support. Cost of customer services and technical
support increased 56% to $173,002 for the nine months ended September 30, 2004
from
$110,716 for the same period in 2003. This increase was primarily due to higher
revenues from customer services and technical support.
Operating expenses
Research and development. Research and development expenses increased 22% to
$268,068 for the nine months ended September 30, 2004 from $219,124 for the same
period in 2003. This increase was primarily due to a $20,505 increase in payroll
and related expenses, partially offset by a $33,051 decrease in subcontractors
expenses, This increase was also partially due to a $52,170 grant received from
a joint Israeli Singapore government program during the nine months ended
-24-
M-WISE, INC.
September 30, 2004 compared with a $111,806 grant received during the same
period in 2003. We believe that we have assembled a small core of highly skilled
and efficient technical personnel sufficient to conduct our current and future
research and development activities. Research and development expenses, stated
as a percentage of revenues, decreased to 24% for the nine months ended
September 30, 2004 from 69% for the same period in 2003.
General and administrative. General and administrative expenses decreased 27% to
$782,634 for the nine months ended September 30, 2004 from $1,069,930 for the
same
period in 2003. This decrease was primarily due to a $216,020 decrease in
professional services expenses, a $ 152,997 decrease in payroll and related
expenses mainly due to options granted for employee services in the nine months
ended September 30, 2003 and a $146,223 decrease in consulting expenses,
partially offset by a $100,783 increase in travel expenses and a $48,902
increase in marketing expenses. General and administrative expenses, stated as a
percentage of revenues, decreased to 69% for the nine months ended September 30,
2004 from 338% for the same period in 2003.
Financing expenses
Financing expenses. Our financing expenses decreased 61% to $15,080 for the Nine
months ended September 30, 2004 from $39,066 for the same period in 2003.
LIQUIDITY AND CAPITAL RESOURCES
Our principal sources of liquidity since our inception have been private sales
of equity securities, stockholder loans, borrowings from banks and to a lesser
extent, cash from operations. We had cash and cash equivalents of $ 52,827 as of
September 30, 2004 and $32,538 as of December 31, 2003. Our initial capital came
from an aggregate investment of $1.3 million from Cap Ventures Ltd. To date, we
have raised an aggregate of $5,300,000 from placements of our equity securities
(including the investment by Cap Ventures and a $4,000,000 investment by Syntek
Capital AG and DEP Technology Holdings Ltd.). We have also borrowed an aggregate
of $1,800,000 from Syntek Capital AG and DEP Technology Holdings Ltd. (See
"Certain Transactions") and as of the date of this prospectus we have no funds
available to us under bank lines of credit. We have a credit line agreement with
Miretzky Holdings Limited. There is no amount currently outstanding under the
line. The credit line is for $300,000.The credit line has no termination date
and does not provide for interest payments.
-25-
M-WISE, INC.
Other than the said credit line agreement with Miretzky we do not have any
Commitments from any of our affiliates or current stockholders, or any other
Non-affiliated parties, to provide additional sources of capital to us. We will
need approximately $1.0 million for the next twelve months for our operating
costs which mainly include salaries, office rent and network connectivity, which
total approximately $60,000 per month, and for working capital. We intend to
finance this amount from our ongoing sales and through the sale of either our
debt or equity securities or a combination thereof, to affiliates, current
stockholders and/or new investors. Currently we do not believe that our future
capital requirements for equipment and facilities will be material.
Operating activities. For the nine months ended September 30, 2004 we
generated $76,155 of cash in operating activities primarily due to a $340,276
increase in deferred revenues, partially offset by a $168,378 increase in
accounts receivable and a $130,011 decrease in other payables and accrued
liabilities. In the same period in 2003, we used $324,512 of cash in operating
activities primarily due to our net loss of $1,628,027 partially offset by a
compensation expense of $372,508 related to the issuance of options for employee
services, a $300,000 increase in redemption premium on shares of Series B
preferred stock, a $256,394 increase in other payables and accrued liabilities,
and a $176,303 increase in accounts payable.
Investing and financing activities.
Property and equipment consist primarily of computers, software, and
office equipment.
For the nine months ended September 30, 2004, net cash used in investing
activities was $73,907 consisting of an investment in equipment. In the same
period in 2003 net cash generated in investing activities was $116,643
consisting of Disposition of equipment.
For the nine months ended September 30, 2004, net cash provided by
financing activities was $18,041 due to a $22,438 increase in notes payables,
partially offset by a $4,397 decrease in bank indebtedness. In the same period
in 2003, net cash provided by financing activities was $7,890 due to a $7,890
increase in bank indebtedness.
-26-
M-WISE, INC.
DIVIDENDS
We have not paid any dividends on our common stock. We are prohibited from
paying dividends under certain promissory notes in the aggregate principal
amount of $1.8 million held by Syntek Capital AG and DEP Technology Holdings
Ltd. We currently intend to retain any earnings for use in our business, and
therefore do not anticipate paying cash dividends in the foreseeable future.
OFF BALANCE SHEET ARRANGEMENTS
None.
Item 3. Controls and Procedures
With the participation of management, our Chief Executive Officer and Chief
Financial Officer evaluated our disclosure controls and procedures within the 90
days preceding the filing date of this quarterly report. Based upon this
evaluation, the Chief Executive Officer and Chief Financial Officer concluded
that our disclosure controls and procedures are effective in ensuring that
material information required to be disclosed is included in the reports that we
file with the Securities and Exchange Commission.
There were no significant changes in our internal control over financial
reporting to the knowledge of our management, or in other factors that have
materially affected or are reasonably likely to materially affect these internal
controls over financial reporting subsequent to the evaluation date.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities and Small Business Issuer Purchases of Equity
Securities
Not applicable
Item 3. Default upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
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M-WISE, INC.
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended and restated Certificate of Incorporation**
3.2 Bylaws**
4.1 Purchase and registration rights agreement and schedule of details**
10.1 Amended and Restated Employment Agreement with Mordechai Broudo**
10.2 Amendment to Amended and Restated Employment Agreement with Mordechai
Broudo**
10.3 Amended and Restated Employment Agreement with Shay Ben-Asulin**
10.4 Amendment to Amended and Restated Employment Agreement with Shay
Ben-Asulin**
10.5 Employment Agreement, Gabriel Kabazo**
10.6 Confidentiality rider to Gabriel Kabazo Employment Agreement**
10.7 Employment Agreement Asaf Lewin**
10.8 2003 International Share Option Plan**
10.9 Form of Option Agreement, 2003 International Share Option Plan**
10.10 2001 International Share Option Plan**
10.11 Form of Option Agreement, 2001 International Share Option Plan**
10.12 2003 Israel Stock Option Plan**
10.13 Form of Option Agreement, 2003 Israel Stock Option Plan**
10.14 2001 Israel Share Option Plan**
10.15 Form of Option Agreement, 2001 Israel Share Option Plan**
10.16 Investors' Rights Agreement dated January 11, 2001**
10.17 Stockholders Agreement**
10.18 Agreement for Supply of Software and Related Services dated October 14,
2002, by and between i Touch plc and m-Wise, Inc.**
10.19 Purchase agreement between m-Wise, Inc. and Comtrend Corporation dated
May 22, 2002**
10.20 Amended and Restated Consulting agreement between Hilltek Investments
Limited and m-Wise dated November 13, 2003**
-28-
M-WISE, INC.
10.21 Consulting agreement between Hilltek Investments Limited and m-Wise
dated June 24, 2003, subsequently amended see exhibit 10.20 above**
10.22 Amendment to Investors' Rights Agreement dated October 2, 2003**
10.23 Appendices to 2003 Israel Stock Option Plan**
10.24 Appendices to 2001 Israel Share Option Plan**
10.25 Credit Line Agreement between m-Wise, Inc. and Miretzky Holdings,
Limited dated January 25, 2004**
21. List of Subsidiaries**
31.1 Rule 13a-14(a)/15d-14(a) Certification.*
31.2 Rule 13a-14(a)/15d-14(a) Certification.*
32.1 Certification by the Chairman Relating to a Periodic Report Containing
Financial Statements. ***
32.2 Certification by the Chief Financial Officer Relating to a Periodic
Report Containing Financial Statements. ***
- -------------
* Filed herewith.
** Incorporated by reference from the registration statement filed with
the Securities and Exchange Commission Registration Statement on Form SB-2 (Reg.
No. 333-106160).
*** The Exhibit attached to this Form 10-QSB shall not be deemed "filed" for
purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), or otherwise subject to liability under that section, nor shall
it be deemed incorporated by reference in any filing under the Securities Act of
1933, as amended, or the Exchange Act, except as expressly set forth by specific
reference in such filing.
(b) Reports on Form 8-K
None
-29-
M-WISE, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
m-Wise, INC.
(Registrant)
Date: November 16, 2004 /s/ Shay Ben-Asulin
-------------------
Name: Shay Ben-Asulin
Title: Chairman
-30-