Mawson Infrastructure (MIGI) - 2020 Q1 - Quarterly Report

PART I-FINANCIAL INFORMATION Item 1. Financial Statements The unaudited interim statements show a significant net loss and shareholders' deficit due to a complex financing transaction Consolidated Balance Sheets Total assets and liabilities surged, shifting shareholders' equity to a deficit due to new securities and obligations Consolidated Balance Sheet Summary (in thousands) | Balance Sheet Item | March 31, 2020 (Unaudited) | December 31, 2019 | | :--- | :--- | :--- | | Total Current Assets | $10,625 | $1,147 | | Total Assets | $10,648 | $1,176 | | Total Current Liabilities | $9,268 | $641 | | Total Liabilities | $14,327 | $641 | | Total Shareholders' Equity (Deficit) | $(3,679) | $535 | - Key new asset and liability items in Q1 2020 include a $3.7 million restricted deposit, $6.37 million in marketable equity securities, an $8.8 million liability for mandatorily redeemable Series B Preferred Stock, and a $5.06 million contingent obligation related to future revenues[14][15] Consolidated Statements of Comprehensive Income (Loss) The company reported a significant net loss of $4.3 million for the quarter, driven primarily by substantial financial losses Comprehensive Income (Loss) Summary (in thousands, except per share data) | Metric | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Operating Loss | $(601) | $(591) | | Financial Income (Loss), net | $(3,699) | $739 | | Net Income (Loss) | $(4,300) | $148 | | Basic and Diluted Net Loss Per Share | $(0.27) | $0.00 | Consolidated Statements of Changes in Shareholders' Equity (Deficit) Shareholders' equity shifted to a $3.68 million deficit, primarily as a result of the $4.3 million net loss for the period Changes in Shareholders' Equity (Deficit) for Q1 2020 (in thousands) | Description | Amount | | :--- | :--- | | Balance as of December 31, 2019 | $535 | | Stock-based compensation | $86 | | Net loss for the interim period | $(4,300) | | Balance as of March 31, 2020 | $(3,679) | Consolidated Statements of Cash Flows Net cash used in operations improved, while the period's cash balance decreased by $347 thousand Cash Flow Summary (in thousands) | Cash Flow Activity | Three months ended March 31, 2020 | Three months ended March 31, 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(302) | $(580) | | Net cash provided by investing activities | $5 | $0 | | Net cash used in financing activities | $(50) | $(150) | | Decrease in cash, cash equivalents and restricted cash | $(347) | $(730) | - Significant non-cash activities during the quarter included the investment in marketable securities ($8.76 million), recognition of a contingent obligation ($5.06 million), and issuance of mandatorily redeemable Series B Preferred Stock ($7.4 million)[23] Notes to Unaudited Interim Consolidated Financial Statements Notes disclose substantial doubt about going concern status and detail a complex transaction involving future revenue rights - The company's operations are focused on treating ophthalmic disorders like Dry Eye Syndrome (DES) through an exclusive license for the LO2A technology[26][27] - Management has determined that conditions such as an accumulated deficit of $38.2 million and recurring operating losses raise substantial doubt about the company's ability to continue as a going concern[28][29] - In February 2020, the company completed a complex transaction involving the sale of 37% of future LO2A revenues to Bonus BioGroup in exchange for Bonus shares, and simultaneously financed a cash investment in Bonus by issuing $7.5 million of mandatorily redeemable Series B Preferred Stock[53][54][65] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a significant net loss driven by financing expenses and a critical liquidity situation Overview The company focuses on developing its LO2A drug and recently executed a major strategic transaction with Bonus BioGroup - The company's business is centered on the clinical development of LO2A for various ophthalmic disorders, with a belief that the greatest potential lies in treating CCH and Sjögren's[82][84] - A Phase IV multi-center trial evaluating LO2A for DES in patients with Sjögren's was completed in May 2020, with topline results anticipated in the second or third quarter of 2020[88] - On February 19, 2020, the company closed a transaction with Bonus BioGroup, exchanging 37% of future LO2A proceeds for Bonus shares, and financed a related $7.4 million cash investment in Bonus by selling $7.5 million of Series B Preferred Stock[89][90][95] Results of Operations The company's net loss widened to $4.3 million from a prior year income, driven by a $3.7 million financial loss Results of Operations Comparison (in thousands) | Expense/Income Line | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Research and development | $(176) | $(63) | | General and administrative | $(425) | $(528) | | Total operating costs | $(601) | $(591) | | Financial income (loss), net | $(3,699) | $739 | | Net income (loss) | $(4,300) | $148 | - The increase in R&D expenses was mainly due to costs from patient recruitment in the company's clinical study[99] - The significant change in financial income (loss) was primarily related to the loss from recognition and subsequent revaluation of the mandatorily redeemable Series B Preferred Stock issued in Q1 2020[101] Liquidity and Capital Resources Current cash resources are insufficient for the next 12 months, raising substantial doubt about its going concern status Cash and Working Capital (in thousands) | Metric | March 31, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $372 | $718 | | Working capital | $1,357 | $506 | - Net cash used in operating activities for Q1 2020 was $302,000, a decrease from $580,000 in Q1 2019[106][107] - Management has determined that current liquidity is insufficient for the next 12 months, which raises substantial doubt about the company's ability to continue as a going concern[109] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company, as a smaller reporting company, has elected not to provide market risk disclosures - Wize Pharma has opted out of providing market risk disclosures, as permitted for a smaller reporting company[117] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2020[118] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[119] PART II-OTHER INFORMATION Item 1A. Risk Factors A new risk factor related to the COVID-19 pandemic has been added, citing potential adverse effects on operations - The company has identified the COVID-19 pandemic as a new material risk factor that could adversely affect its business and operations[123] - Potential impacts from the pandemic include disruptions to raw material supply, delays in clinical trial enrollment and conduct, and potential delays in reviews and approvals from the FDA and other health authorities[125][126] Item 5. Other Information The company amended its License Agreement with Resdevco to include a conditional right to terminate the agreement - On May 4, 2020, the company amended its License Agreement with Resdevco, granting Wize Israel and OcuWize a conditional right to terminate the agreement[129] Item 6. Exhibits This section lists filed exhibits, including officer certifications and XBRL data files for the financial statements - The report includes certifications from the CEO and CFO, as well as XBRL instance documents for the financial statements[130][131]