Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. M WISE INC (1242047) 10-Q published on May 16, 2011 at 12:03 pm
Reporting Period: Mar 30, 2011
The Company accounts for its potential severance liability of its Israeli subsidiary and one executive in accordance with ASC 715, "Compensation - Retirement Benefits". The Company's liability for severance pay is calculated pursuant to applicable labour laws in Israel and the employment contract 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 for Israeli subsidiary is fully accrued and reduced by monthly deposits with severance pay funds and insurance policies. As at March 31, 2011 and December 31, 2010, the amount of the liabilities accrued were $451,223 and $429,269, respectively. Severance pay expenses for the three months ended March 31, 2011, and 2010 were $14,734 and $27,241, respectively.
The Company makes monthly payments to the severance funds with insurance companies, that the employees choose for the Israeli subsidiary. The amounts deposited with the insurance companies are not under the control or administration of the Company. The insurance companies are governed by local regulations that limit the asset allocation in high risk assets.
Under the Israel 2001 Share Option Plan, management authorized stock options for 2,403,672 common shares of the Company, and under the International 2001 Share Option Plan, stock options for 300,000 common shares. As of March 31, 2011, 3,672 options under the Israel 2001 Share Option Plan for common stock were not yet granted and available for future grant.
Under the Israel 2003 Stock Option Plan, management authorized stock options (on a post conversion, post split basis) for 16,094,106 preferred Class "B" shares. On January 5, 2006, the share option plan was amended to authorize an additional 1,260,000 stock options. On August 14, 2006, the share option plan was amended to authorize an additional 6,000,000 stock options. On August 3, 2009, the exercise price of 5,000,000 options granted under the Israel 2003 Stock Option Plan and 11,000,000 options granted under the 2003 International Share Option Plan was amended to $0.02. On December 1, 2010, the exercise price of 38,340,150 options granted under the Israel 2003 Stock Option Plan and 38,650,000 options granted under the International 2003 Share Option Plan was amended to $0.0017. As of March 31, 2011, 38,256 options under the Israel 2003 Stock Option Plan were not yet granted and available for future grant.
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 required 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 U.S. 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 Quarterly Report. Subject at all times to relevant federal and state 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 Quarterly Report are qualified by these cautionary statements and there can be no assurance of the actual results or developments.
m-Wise, Inc. (the “Company”) was incorporated in February 2000, and commenced operations immediately thereafter. We initially primarily provided pan-European wireless application service provider operations by hosted MOMA Platform services to customers in the United Kingdom, Spain, France and Italy. We established data centers in Spain, Italy, and France that were connected to our main data center in the United Kingdom. We had connectivity and billing arrangements with cellular operators that enabled us to provide our hosted services. We gained strong credibility and experience as a wireless application service provider during calendar years 2000 and 2001, while we continued to build and develop our wireless middleware product. However, due to the high costs and low revenues in the European wireless application service provider (ASP) market, in 2002, our management decided to transition our focus away from pan-European wireless application service providers, toward installing and licensing our middleware technology at cellular operators and wireless application service providers worldwide, and to operate through original equipment manufacturers (OEMs) and regional sales representatives to sell our products. Our shift away from hosted wireless application services using our MOMA Platform enabled us to focus more on the core middleware benefits of our technology in fiscal 2002.
During the first quarter of 2011 m-Wise signed a non binding letter of intent (“LOI”) to sell substantially all of our assets to Vringo, Inc. (NYSE Amex: VRNG). Under the terms of the LOI, Vringo will issue m-Wise 1.9 million shares of its common stock, provide m-Wise's management with a retention package comprised of options to purchase 500,000 shares of common stock, and assume and pay over a two year period certain of m-Wise's expenses and related costs in the amount of $615,000. Vringo will also issue a five-year promissory note for $320,000 convertible into 200,000 shares of its common stock for certain services provided in connection with the transaction. The execution of this LOI is followed by a due diligence process conducted by Vringo with the objective of executing a definite asset purchase agreement. The proposed transaction with Vringo is further subject to regulatory approval and the approval of both the boards of directors and stockholders of Vringo and the Company.
Our participation in this transaction with Vringo is based on our understanding and expectation that the merger of the assets of m-Wise and Vringo has the potential to create an increased value to the share holders of both companies as Vringo represents an advance technological approach towards mobile video and entertainment services for the rapidly growing market of smart phones, while m-Wise provides a robust and highly mature infrastructure and backbone for the management and delivery of such services. However, no assurance can be given that such agreement will result in increased value for either our or Vringo’s shareholders.