M WISE INC - FORM 10-K - March 12, 2010

Attached files

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EX-21.1 - M WISE INC	v177169_ex21-1.htm
EX-31.2 - M WISE INC	v177169_ex31-2.htm
EX-32.1 - M WISE INC	v177169_ex32-1.htm
EX-31.1 - M WISE INC	v177169_ex31-1.htm
EX-32.2 - M WISE INC	v177169_ex32-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ______________

Commission file number 000-51743

m-Wise, Inc.

(Exact name of registrant as specified in its charter)

Delaware		11-3536906
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3 Sapir Street

Herzeliya Pituach, Israel 46852

(Address of principal executive offices) (Zip Code)

+972-73-2620000

(Registrant’s telephone number, including area code)

Securities registered under Section 12(b) of the Act:

None.

Securities registered under Section 12(g) of the Act:

Common Stock, par value $0.0017 per share

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes o No þ

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o (Do not check if smaller reporting company)	Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No þ

As of June 30, 2009, 139,322,145 shares of common stock were outstanding. The aggregate market value of the common stock held by non-affiliates of the registrant, as of June 30, 2009, the last business day of the 2nd fiscal quarter, was approximately $2,247,677 based on the closing sale price for the registrant’s common stock as quoted on the Over-the-Counter Bulletin Board on that date. Shares of common stock held by each director, each officer and each person who owns 10% or more of the outstanding common stock have been excluded from this calculation in that such persons may be deemed to be affiliates. The determination of affiliate status is not necessarily conclusive.

As of March 11, 2010, there were 147,392,452 shares of our common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

None.

TABLE OF CONTENTS

Part I		3

Item 1. Business		3
Item 1A. Risk Factors		9
Item 1B. Unresolved Staff Comments		9
Item 2. Properties		9
Item 3. Legal Proceedings		9
Item 4. (Removed and Reserved)		9

Part II		10

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		10
Item 6. Selected Financial Data		11
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations		11
Item 7A. Quantitative and Qualitative Disclosures About Market Risk		19
Item 8. Financial Statements and Supplementary Data		20
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure		21
Item 9A[T]. Controls and Procedures		21
Item 9B. Other Information		23

Part III		23

Item 10. Directors, Executive Officers, and Corporate Governance		23
Item 11. Executive Compensation		26
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		31
Item 13. Certain Relationships and Related Transactions, and Director Independence		32
Item 14. Principal Accounting Fees and Services		36

Part IV		36

Item 15 Exhibits, Financial Statement Schedules		36

Signatures		39

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This discussion in this Annual Report regarding m-Wise, Inc. and our business and operations contains "forward-looking statements." These forward-looking statements use words such as "believes," "intends," "expects," "may," "will," "should," "plan," "projected," "contemplates," "anticipates," or similar statements. These statements are based on our beliefs, as well as assumptions we have used based upon information currently available to us. Because these statements reflect our current views concerning future events, these statements involve risks, uncertainties and assumptions. Actual future results may differ significantly from the results discussed in the forward-looking statements. A reader, whether investing in our common stock or not, should not place undue reliance on these forward-looking statements, which apply only as of the date of this report.

When used in this Annual Report on Form 10-K, "m-Wise," "we," "our," and "us" refers to m-Wise, Inc., a Delaware corporation.

PART I

ITEM 1. BUSINESS

BACKGROUND

We were incorporated in Delaware in February 2000 under the name of Wireless Auctions, Inc. We develop, manufacture, market and support a software and hardware-based wireless application platform marketed under the brand MOMA platform. A platform, in the wireless industry, is an entry point for services and content from different types of media (such as the Internet, magazines, television) into the mobile networks, and through them to their customers- mobile phone users. The MOMA platform enables cellular operators and wireless application service providers to provide data and multimedia value-added services and content to their customers such as: person to person telephone calls, text messaging, ring tones, sports news and alerts, pictures and TV voting for contest shows, over wireless networks. Our platform is an end-to-end application and middleware platform that includes monitoring, billing, reporting, content management, customer care, application development, generic application engines, third-party provisioning and centralized third-party management tools. These services are called value-added services in the wireless industry. Our platforms have been utilized since March 2000 in over 300 applications across more than 50 European and Asian networks for over 50 various internationally known content and media providers. These include applications such as content delivery services, games, information services, alerts, advertising and promotions, which were developed and delivered on a hosted basis for content and media providers, through our wholly owned UK subsidiary and its Italian, French and Spanish subsidiaries. In the second half of 2002, we ceased operating and owning hardware infrastructure in order to concentrate on licenses and installed sales of our technology, and the operations of our UK subsidiary and its European subsidiaries were discontinued. Shay Ben-Asulin and Mordechai Broudo were the directors of our wholly owned UK subsidiary. Our UK subsidiary had three wholly owned subsidiaries: (i) m-Wise s.a.r.l. (France), which previously provided sales and customer support in France, and the sole officer and director of which was Mordechai Broudo, our Chief Executive Officer; (ii) m-Wise S.r.l. (Italy), which previously provided sales and customer support in Italy, and the sole officer and director of which was Shay Ben-Asulin, our Chairman and Secretary; and (iii) m-Wise Spain, S.L, which previously provided sales and customer support in Spain, and the sole officer and director of which was Mordechai Broudo. Our UK subsidiary was dissolved pursuant to Section 652A of the Companies Act of 1985 on November 11, 2003. The liquidation of our UK subsidiary and its subsidiaries is not likely to affect our revenues in Europe as our European clients contract directly with us, or via a channel partner.

We currently primarily operate through m-Wise Ltd., our wholly owned subsidiary in Israel and our new subsidiary in Brazil m-Wise Tecnologia LTDA. The officers of our Israeli subsidiary are Mordechai Broudo, Chairman, Zach Sivan, Chief Executive Officer, Asaf Lewin, Chief Technology Officer, and Gabriel Kabazo, Chief Financial Officer, and the directors are Shay Ben-Asulin and Mordechai Broudo. We currently sell our MOMA Platform directly, through potential channel partners and through regional representatives in Taiwan, Philippines, Colombia, Brazil and the United States.

INDUSTRY BACKGROUND

GROWING MARKET FOR VALUE-ADDED SERVICES.

The wireless communications market primarily consists of cellular telephone networks, but also includes pagers, personal digital assistants, and private mobile networks such as those used by utility companies and delivery services. Value added services constitute significant additional revenue sources for wireless networks and wireless application service providers (WASPs), and have become essential components of cellular services in only a few years. This has been documented by industry analysts and journalists, as well as by the financial reports from various cellular operators that describe data services as a growing percentage of the carriers' revenues.

Originally utilized solely for telephone communications, the wireless phone networks have added data and multimedia content for the benefit of their subscribers, such as:

X SMS - short messaging service - enables subscribers to send and receive short (160 character) text messages and graphics images;

X EMS - enhanced message service - enables subscribers to send and receive high quality images and graphics;

X MMS - multimedia messaging service - enables the delivery of further enhanced images and audio files;

X WAP - web application protocol - enables subscribers to access the Internet and send and receive email;

X – Content download – enables subscribers to download digital content such as ringtones, pictures, animations, games and video files to their mobile handsets

X Interactive media, such as quizzes and online gaming, enabled, inter alia, by Java (J2ME) technology;

X Subscriber information, such as stock quotes or sports news;

X "Push" technology, enabling content providers to broadcast advertisements to subscribers;

X Community services such as chat and dating; and

X Entertainment media, including radio stations, music and magazines.

Our technology is referred to as “middleware” or a “Content and Service Delivery Platform,” as it integrates the wireless telecommunications providers with mainstream information technology industries. Providers developing middleware technology supply a means of integrating the wireless telecommunications providers, mainstream IT, and content and media provider industries to deliver value added services to wireless subscribers. The introduction of the wireless value added services industry has put an onus on cellular operators and service providers to use their internal operational infrastructure as an externally facing, strategic service delivery platform. Wireless middleware technology seeks to form a crucial part of this platform, thus facilitating the cellular operators and service providers’ efforts to connect to content partners and then deliver compelling services to their wireless subscriber base, regardless of the device used by the subscribers.

GROWING IMPORTANCE OF MIDDLEWARE AND CONTENT DELIVERY SOLUTIONS

Our MOMA Platform plays the role of content and service delivery platform which provides a centralized approach to middleware. We view the role of our middleware as central to the service offering by reducing the complexity in the supply chain. Wireless operators and wireless application service providers currently negotiate with a large number of industry players to deliver content, including access providers, payment providers, content aggregators and applications developers. We emphasize our business value as reducing service development costs for wireless operators and wireless application service providers by providing a single horizontal platform on which to build and deliver value added services, and on which to manage value added services, content, and billing relationships. We believe that the single middleware solution reduces the time spent negotiating with third parties to implement and run new services, and then manage those agreements.

We believe that middleware and content delivery solutions will play a central role in the wireless operator and wireless application service providers' service delivery offering. The core middleware will be installed on the operator and wireless application service provider’s network to fulfill the functions of service development and management, with smaller versions of the platform installed at the operator or wireless application service providers' subsidiaries in additional geographic markets to share central sources of information. This approach lowers the costs for the operator by centralizing the processes that are currently built individually by content providers, geographic market, and other criteria.

THE M-WISE STRATEGY

We believe that we were early to recognize the role of middleware and content delivery solutions in an increasingly complex platform strategy, and that we positioned ourselves to successfully prove the capacity of our content and service delivery platform to act as middleware for wireless value added services regardless of different standards, device types and/or billing infrastructures. One of the ways in which we are promoting our middleware technology is by addressing wireless operators and wireless application service providers requirements for a centralized platform on which to build and manage value added services content and applications from a number of different providers. In a similar approach, we are targeting wireless application service providers in order to provide them with a centralized platform on which to develop and deliver their own service offering. We believe that a strong synergy underlies for us in acquiring a mobile content provider that sells directly to consumers. With the power of our current technology and geographical reach, a direct approach to consumers can have a tremendous effect on our revenues and profitability.

We are always actively seeking to expand the range of our value proposition by recruiting channel partners with the needed synergy for promoting products in the nature of our solutions and with a strategic position to market our products to an identified potential customer base.

We are also working consistently in the expansion of the range of the solutions that can be based on our technology. Recently we have started certain proactive moves with the objective of expanding implementations of wireless marketing solutions, such as advertising and customer loyalty programs based on our middleware and content delivery solutions.

PRODUCTS

We develop, manufacture, market and support a software and hardware-based Content and Service Delivery Platform marketed under the brand MOMA Platform (MOMA is a middleware, i.e. a bundle of hardware and software parts that together provide all the functionalities described herein). The hardware consists of off-the-shelf products, which include an array of servers, network switches, high availability power supply and digital storage devices, that our customers purchase per our specifications or that we may purchase on their behalf, typically for no additional consideration other than the cost of such hardware components. Other customers may use an extension of the MOMA platform that is hosted by us, as an outsourced service for content and service delivery. The main software that runs these hardware components consists of the MOMA proprietary software code which we have developed. In addition, we use standard off-the-shelf software for which we purchase licenses for our use or on behalf of our customers and freeware (such as Linux, JSP, Microsoft SQL, Checkpoint's firewall solutions, Tomcat).

Our MOMA Platform provides operators and service providers of wireless data systems an end-to-end range of functionalities necessary to develop, manage and launch wireless value added services and transactions. These functionalities include, among others, the ability to:

o Minimize the capital, commercial, training and technical requirements by providing a common platform for the operator or wireless application service provider's IT, marketing, customer care and billing departments to manage current and next-generation wireless value added services;

o Minimize costs by providing a common platform for all third-party content and service providers to connect and bill through the operator or wireless application service provider's wireless network;

o Increase value added services revenues by accelerating the time to market for third-parties, and by increasing the number of content providers, media companies and other enterprises able to enter the wireless value added services market;

o Centralize and itemize the operator or wireless application service provider's reporting and billing for all value added services by third party, delivery channel (e.g. SMS, MMS or other) or billing mechanism (e.g. premium messaging, IVR, pre-paid data-card or other);

o Mitigate many typical problems, such as real-time billing, anti-spam policies, itemized value added services billing and adequate customer support, through the delivery of a live window and centralized controls for all value added services, billing modules and third-party providers;

o Manage and deliver mobile oriented content catalogues and adapt such content to the large variety of mobile handsets by automatically identifying handsets while downloading the content and transcoding the content to comply with handsets' specifications; and

o Allow third parties to customized presentation layers such as web and WAP interfaces to display content and applications and link value added services with such IP based interfaces.

One example of how our middleware or MOMA Platform works is as follows:

(i) a consumer watching television sees an advertisement inviting the consumer to purchase and download a new ring tone for their cellular phone, by sending a SMS via their cellular phone;

(ii) our customer, the mobile operator, will then send back to the consumer a SMS or a WAP Push message, redirecting them to a download site on the Internet, where the consumer may retrieve the requested ring tone.

To enable this type of service, a middleware, such as our MOMA Platform performs the following:

(a) the platform receives the consumer's SMS from the network, in this case the request to download a certain ring tone;

(b) the platform then composes the response SMS to the consumer;

(c) the platform hosts the download site for the new ring tone and enables the mobile operator to monitor the response to the advertisement offering the new ring tone in real time;

(d) the platform identifies the type of handset approaching for the ringtone download and adapt to selected ringtone to the given handset prior to the download event by such handset;

(e) the platform enables the mobile operator to issue a variety of reports regarding its services, including revenue breakdown, billing and settlement;

(f) the platform enables our client to modify the content of their services, i.e. edit language of messages, add new content items for sale; and

(g) the platform interfaces with the mobile operator's network and can flexibly determine the billing and pricing arrangement between the consumer and mobile operator.

The functions described above are performed by the MOMA Platform proprietary code that we have developed, which requires standard operating systems and hardware (mainly servers) to operate.

We provide our customers with various services, such as standard-level product support and maintenance, product upgrades (typically at an annual fee of 15% of initial license price), and remote management and service monitoring, that are priced separately. The MOMA Platform software is designed to enable its users to customize and manage certain aspects of the product, such as the "look and feel" of the user interface, the language of the user interface, and the connection of the MOMA Platform to external services. Further customization, when required, is also priced in addition to the license fee.

Our MOMA Platform, embodied in hardware and software technology, provides operators of mobile data systems the capability to offer the above services and other interactive content services. Our technology facilitates necessary billing and customer service functions and interfaces with commercially available media content.

CUSTOMERS

Our current wireless data customers include prominently global wireless application service providers and wireless operators. For the year ended December 31, 2007, Thumbplay represented 46% of our sales, Comtrend Corporation represented 14% of our sales and Supportcomm represented 13% of our sales. For the year ended December 31, 2008, Thumbplay represented 45% of our sales, Arvato Mobile represented 17% of our sales and Comtrend Corporation represented 9% of our sales. For the year ended December 31, 2009, Thumbplay represented 32% of our sales, Arvato Mobile represented 21% of our sales and Comtrend Corporation represented 10% of our sales.

None of our customers are affiliated with us, our subsidiary, or any of our officers, directors or principal shareholders.

SALES CHANNELS

We primarily operate through international and regional sales representatives to distribute and sell our products on a project-by-project basis. For example, we recently signed an OEM agreement with Comverse Technologies where according to this agreement, Comverse will distribute our content delivery solutions to their customer base which consists of a few hundred wireless operators. In this framework, we cooperate with Comverse in RFP processes and demonstrations to potential customers. The agreement with Comverse states a transfer price between m-Wise and Comverse consisting of volume-based license fees, labor-based professional services, and annual support and maintenance services.

RESEARCH AND DEVELOPMENT

We devote significant resources to research and development. In January 2003, we were jointly awarded with Hewlett Packard an SIIRD Grant (Singapore-Israel Research and Development Foundation government grant of $186,343 USD) to upgrade the MOMA platform to support MMS and J2ME (Java technology for wireless applications) for wireless carriers in the Far East.

This grant was funded during the years ended December 31, 2003, and 2004, and is reflected in our consolidated financial statements. We expect to continue significant research and development activities to integrate new technologies into our platform. During the year ended December 31, 2007, we expended $642,766 on research and development activities. During the year ended December 31, 2008, we expended $758,693 on research and development activities. During the year ended December 31, 2009, we expended $548,673 on research and development activities

INTELLECTUAL PROPERTY

Our intellectual property rights are important to our business. We protect our intellectual property rights by the use of contractual provisions with our customers and partners embodied in our license and partnership agreements, and procedures to maintain the confidentiality of trade secrets. Most of our intellectual property is embodied in software. The functionality of all software can eventually be reverse engineered, given enough time and resources. We rely on common law for protection of our trademarks "MOMA Gateway" and "m-Wise".

COMPETITION

We encounter competition from numerous competitors, including dozens of smaller companies addressing niche content markets. Our larger competitors include Unipier Ltd. in SMS and MMS, Mobilitech, Inc. in J2ME and centralized technology platforms (middleware), Akumitti, End2end, Openwave Systems Inc. in application platforms, and LogicaCMG and Materna GmbH Information & Communications in the middleware arena. We believe our competitive strengths are our superior technology, which has been greatly enhanced since its release, and our technical experience in integrating our middleware with various third-party technologies already existing within the cellular operator or wireless application service providers network (e.g. SMSCs, MMSCs and legacy billing systems). We also believe our competitive strengths are further enhanced by our presence in the market through our sales to large local and global wireless service providers in each of the relevant vertical markets, partnering with industry-leading global and regional OEM/channel partners as well as local sales representatives, flexibility, and commercial experience in the industry.

EMPLOYEES

Together with our subsidiary, we employ a total of 19 employees, including our executive officers. 5 employees are employed by m-Wise and 14 employees are employed by m-Wise Israel, two of whom also provide their services to us (Messrs. Sivan and Lewin). All employment agreements with our executive officers and directors are described below under the caption "Executive Compensation." We believe our employee relations to be excellent. None of our employees is represented by a labor union, and all are employed on a full-time basis.

Since we have determined to pursue an aggressive objective, which will require us to maintain competitive advantages in a range of areas, we intend to maintain a small core of highly skilled technical experts in key areas. This team will be responsible for maintaining the leadership of our technology platform, designing our future technology upgrades and products, and utilizing outsourced development firms on an as-needed basis to implement the necessary codes and assist in dealing with peaks derived from sales and projects.

We anticipate that managing potential growth during 2010-2011 while maintaining a small core team will require us to hire additional personnel, as required by growing sales volumes. In the event that the level of our business increases we may have to hire additional personnel. We would expect that such personnel would include a few additional personnel for technical support, account management and sales support for the distribution channels. Israeli law and certain provisions of the nationwide collective bargaining agreements between the Histadrut (General Federation of Labor in Israel) and the Coordinating Bureau of Economic Organizations (the Israeli federation of employers’ organizations) apply to our Israeli employees. These provisions principally concern the maximum length of the workday and the workweek, minimum wages, paid annual vacation, contributions to a pension fund, insurance for work-related accidents, procedures for dismissing employees, determination of severance pay and other conditions of employment. We provide our employees with benefits and working conditions above the required minimum. Furthermore, pursuant to such provisions, the wages of most of our employees are subject to cost of living adjustments, based on changes in the Israeli CPI (Consumer Price Index). The amounts and frequency of such adjustments are modified from time to time.

Israeli law generally requires the payment of severance pay upon the retirement or death of an employee or upon termination of employment by the employer or, in certain circumstances, by the employee. We typically fund our ongoing severance obligations for our Israeli employees by making monthly payments for managers' insurance policies and severance funds.

Israeli law provides that employment arrangements with employees who are not in senior managerial positions or positions who require a special degree of personal trust, or whose working conditions and circumstances do not facilitate employer supervision of their hours of work, must provide for compensation which differentiates between compensation paid to employees for a work week (as defined under Israeli law) or for maximum daily work hours and compensation for overtime work. The maximum number of hours of overtime is limited by law. Certain of our employment compensation arrangements are fixed and do not differentiate between compensation for regular hours and overtime work. Therefore, we may face potential claims from these employees asserting that the fixed salaries do not compensate for overtime work, however, we do not believe that these claims would have a material adverse effect on us.

ITEM 1A. RISK FACTORS

Not applicable.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Our offices are located at 3 Sapir Street, Herzeliya Pituach, Israel 46852, in leased office space of approximately 300 square meters (approximately 3,200 square feet), which we believe is adequate for our current and future operating activities. Our monthly rent is $7,500.

ITEM 3. LEGAL PROCEEDINGS

We are currently not involved in any material legal proceedings.

ITEM 4. (REMOVED AND RESERVED)

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

MARKET FOR COMMON STOCK

As of March 11, 2010, there were 22 owners of record of our common stock, which on March 1, 2005, started trading on the Over-the-Counter Bulletin Board (the “OTC Bulletin Board”) under the symbol "MWIS".

Set forth below are the range of high and low bid quotations for the periods indicated as reported by the OTC Bulletin Board. The market quotations reflect interdealer prices, without retail mark-up, mark down or commissions and may not necessarily represent actual transactions.

Quarter Ending	High		Low
3/31/08	$	0.11	$	0.04
6/30/08	$	0.06	$	0.03
9/30/08	$	0.05	$	0.02
12/31/08	$	0.03	$	0.02
3/31/09	$	0.03	$	0.02
6/30/09	$	0.03	$	0.02
9/30/09	$	0.04	$	0.02
12/31/09	$	0.04	$	0.02

On March 11, 2010, the closing bid price of our common stock was $0.03 per share.

There are currently outstanding warrants for the purchase of 13,872,033 shares of common stock and 78,518,197 shares of common stock reserved under employee stock option plans pursuant to which additional shares may be issued. As of March 11, 2010, 147,392,452 shares of common stock are issued and outstanding.

Holders of shares of common stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of shares of common stock have no cumulative voting rights. Holders of shares of common stock are entitled to share ratably in dividends, if any, as may be declared, from time to time by the Board of Directors in its discretion, from funds legally available therefore and subject to any preferential rights conferred to the holders of preferred stock, if any. In the event of a liquidation, dissolution or winding up of m-Wise, the holders of shares of common stock shall be entitled to receive all of the assets of m-Wise available for distribution to the holders of common stock ratably in proportion to the number of shares of common stock held by them. There are no conversion rights, redemption or sinking fund provisions with respect to the common stock.

The following table sets forth information relating to securities authorized for issuance under our equity compensation plans as of December 31, 2009.

Equity Compensation Plan Information

as of December 31, 2009

Plan category	Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights		Weighted Average Exercise Price of Outstanding Options, Warrants and Rights			Number of Securities Remaining Available for Future Issuance under the Plan
	(a)		(b)			(c)
Equity compensation plans approved by security holders		99,901,639		$	0.035		41,928
Equity compensation plans not approved by security holders		0		$	—		0
Total		99,901,639		$	0.035		41,928

Recent Sales of Unregistered Securities

Not applicable.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We were 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. Altogether, we were enabling delivery and billing of value added data services to over 100 million wireless users by our clients, such as content and media providers, advertising agencies, and entertainment companies.

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. The wireless application service providers’ operations provided us the ability to commercially test our product across multiple geographic and vertical markets, to test our Platform's management of multiple applications and services across various operators and partners, and to test our time-to-market and cost efficiencies in developing value added services using different protocols for the transmission of data and methods of user service interactions (e.g. SMS, IVR and J2ME). SMS, which stands for Short Messaging Service, is built into all GSM cellular phones and enables subscribers to send and receive text messages of up to 160 characters. IVR, which stands for Interactive Voice Response, is utilized, among others, for billing certain value added services using premium-rate fixed-line phone systems. J2ME, which utilizes Java programming technology built into certain cellular phones, enables applications to be written once for a wide range of devices, to be downloaded dynamically, and to leverage each device’s native capabilities. However, we lacked sufficient financial and management resources to dominate the pan-European wireless application service providers market and achieve profitability. During the year ended December 31, 2001, we had no revenues and a net loss of $4,442,913. By December 31, 2001, we had invested $569,389 in equipment, and had capital and lease costs of $84,414.

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. Therefore, our management decided to liquidate, or allow the liquidation of the UK subsidiary, m-Wise Ltd., and its three subsidiaries in Italy, France and Spain, by creditors and local legal authorities. Our UK subsidiary was dissolved pursuant to Section 652A of the Companies Act of 1985 on November 11, 2003. Through November 11, 2003, we had invested $3.2 million in the UK subsidiary and its subsidiaries. The operations of those subsidiaries were accounted for as discontinued operations in the financial statements.

Our shift away from hosted wireless application services using our Platform enabled us to focus more on the core middleware benefits of our technology in fiscal 2002. This shift toward installed platforms also coincided with growing interest, as documented by wireless industry analysts, among cellular operators and service providers for wireless middleware's capability to support strategic service delivery.

During calendar 2002, we channeled our research and development efforts to enhance and update our middleware technology to interface with advanced and emerging wireless technologies such as MMS (Multimedia Messaging Service - delivery of highly enhanced images and audio files) and J2ME. We also upgraded our middleware platform to incorporate modules for application deployment and management, for centralized management of multiple value added services and multiple third-party content and media providers, and for managing increased data traffic and real-time billing and reporting requirements.

Also during calendar 2002, we restructured our sales efforts toward establishing distribution channels via original equipment manufacturers (“OEM”s) and partnerships with major IT vendors and system integrators. During this period, we took important steps to move from a direct sales strategy to using channel partners and original equipment manufacturers to distribute our products. We were therefore building partnerships with large original equipment manufacturers and system integrators that already had large sales teams, existing relationships with cellular operators, the visibility and brand value to interest potential new clients, and the requisite financial backing to support the long sales cycle and finance our customers where necessary. In fiscal 2003, we had to direct our research and development resources in an effort to respond to specific business opportunities that were introduced to us by our distributors and original equipment manufacturers, and to be able to meet our customers enhanced requirements in elements such as increased transactions volume support and new J2ME possibilities. We also had to make significant cuts in our expenses to offset the effects of the delay in finalizing agreements with several prospective clients. We believe that we have managed to do so without affecting the quality of our products and the level of customer service we provide. We believe that our current product offering is very attractive to the market both in terms of quality and pricing tag.

During calendar year 2004, we followed the market evolution with respect to the enhanced ability to deliver downloadable content directly to mobile phones and invested significant research and development efforts to comply with such new market trends. We substantially improved the MOMA Platform mobile content management abilities, especially with respect to content adaptation to a growing number and types of mobile handsets, and connectivity between the MOMA platform and content presentation layers such as Internet and WAP interfaces. We also concluded sales agreements with new wireless operators and wireless application service provider clients, and at the same time, improved our product positioning in the market.

During calendar year 2005, we continued to follow-up with the rapid changes in the mobile entertainment market, especially with the growing introduction of enhanced mobile entertainment services through the third generation infrastructure for wireless services, and the continuous development of wireless handsets and their ability to present higher levels of multi media. We invested significant research and development efforts in complying with these changes, and indeed, the delivery of enhanced mobile entertainment services became a central part of the MOMA Platform functionalities. We also identified a growing trend in the market that changed the way potential wireless operators and application service provider customers acquired mobile entertainment platform functionalities. We identified that many potential customers preferred to outsource platform functionalities to service providers (ASPs) rather than to purchase platform and install on site (Customer Premises Model). We invested significant funds and efforts in the infrastructure that was required for this ASP model. Indeed many of the customers that we acquired in 2005 chose to use the hosted license model, and this also had an influence on our cash-flow as the business model of such model was based on monthly payments of on-going license and professional service fees instead of lump-sum license fee that is typical of the customer site installed model. We believe that the hosted model was actually beneficial to the stability of the revenues flow, as although we have to waive relatively large initial fees against platform license, in the long term we are being compensated in steady and growing streams of monthly revenues.

During calendar year 2006, we invested extensive efforts in establishing our customer base and expanding our distribution channels. We implemented a very large project for our Brazilian customer, SupportComm, in which we went through a very significant enhancement of our technology and its capacity. We also expanded the term and scope of our relationship with our US based customer, Thumbplay, and significantly expanded the range of products and services that we provide to this customer who is currently the leading mobile entertainment service provider in the US market. We worked very closely with Comverse Technologies in a technical evaluation process that resulted in being selected by Comverse as their OEM solution for content management and delivery. According to the agreement, Comverse will distribute our technology to its customer base, and this agreement represents a substantial expansion of our sales opportunities.

During calendar year 2007, we were able to acquire prestige and market leader customers, and strengthen the profit share model that we began developing in 2005. We signed profit share based deals with News International, part of the News Corp group, to deliver mobile entertainment services in conjunction of leading UK newspapers, The Sun and The Times. We signed a profit share based deal with Telcogames, a leading mobile games company, to provide a hosted environment for the delivery of their services to their customers. This deal expanded the reach of our technology and it made it available to the large market of mobile games provider which we actively pursue. We signed a deal with Arvato Mobile, part of the great media group Bertelsmann and one of the largest leaders in mobile entertainment worldwide, to provide large variety of mobile content management and delivery services on a profit share model. We also strengthened our relationships with existing customers such as Thumbplay, SupportComm, Logia Mobile and Interchan (formerly Comtrend) by providing the needed support and technical expertise to their expansion and expanding the basis for cooperation. We clearly saw that our business shift made in 2005 from a license model to profit share model started to bear the desired outcome by generating a stable business environment for recurring revenues and consistently increasing profitability. Also during 2007, we made considerable business development investments in the penetration into the US market and the establishment of a local sales and marketing presence.

During calendar 2008, we expanded our business in our primary markets of the USA and Brazil. Our US presence, which we established in 2007, developed and expanded as we had hoped, and we signed new deals in this territory during 2008. We geared our special expertise in the mobile entertainment industry and signed deals with records labels such as Universal Motown Republic Group and Interscope which are part of the Universal Records Group, to deliver various artist specific mobile content experience. We started working with the leading WPP advertising agency, Burson Marsteller, and delivered a relatively small mobile marketing project for them with the expectation to become their selected technology partner in this market segment and launch additional projects in the future. We also laid the groundwork for two additional significant business deals in the US which we executed in 2009. We also secured two major deals in the territory of Brazil with Zero 9 and David2Mobile’s Boltcel, leaders in the Italian mobile entertainment market that plan to launch their services in Brazil using our technology. We were able to strengthen our partnerships with existing customers, Thumbplay, Arvato Mobile, Interchan, Logia Mobile and Supportcomm and were able to benefit from the revenue share model that we have established with some of them and see growth in our revenues following their growth in business. Unfortunately we had to depart from customers such as The Sun newspaper (one of the accounts we had in News International), due to expiration of our contract, and Telcogames, due to Telcogames bankruptcy procedures. We saw the implication of the global economy downturn reflected in the activity of some of our customers, yet despite that, we experienced significant improvement in our revenue growth of 23% since 2007.

Calendar year 2009 was an exciting year for m-Wise in which we had to face many challenges imposed by the global economy downturn and yet we were able to continue the path of growth of the Company and turn the 2008 loss into profit.

During 2009 we expanded and further established our presence in the Americas. We increased volume of sales in the US market and engaged and expanded relationships with many key players in the entertainment industry such as Fox Mobile Group, Universal Records and Warner Music. We also significantly strengthened our position as a mobile marketing leader and executed mobile marketing campaigns for companies like Kodak and WPP's Burson Marsteller agency.

Additionally, we expanded our penetration into the Latin and Central America markets. We established a local presence in Brazil and launched new mobile entertainment services for local market leaders such as Zero 9, Mega-Vas and Boltcel. We see Brazil as a key market for m-Wise and we plan to expand our presence in this country and use it to establish access additional Latin American markets such as Mexico and Argentina. We also signed an agreement with the Digicel Group of mobile carriers who selected us to deliver mobile content services in 26 Caribbean and Central and Latin American markets. We expect to see the results of this agreement in 2010.

Calendar year 2009 was a significant year for m-Wise as we have been able to emphasize our unique position as an off-deck mobile marketing and mobile entertainment service provider. We have significantly enhanced the underlying technology of our content management and delivery platform and apply many improvements that would make it an off-the-shelf platform that significantly minimizes time-to-market for entertainment companies, content storefronts and mobile marketing campaigns.

Further, calendar year 2009 was a key year in the evolution of mobile entertainment as the expansion and further penetration of improved mobile networks and mobile devices became a clear phenomena this year. We foresee the expansion of mobile video and other rich media services as a result of improved mobile bandwidth and the growth of wide screen mobile devices and we continuously expand our investments in relevant and supporting technologies. With this evolution we expect to see in 2010 more and more businesses looking to establish and expand their presence and services in the mobile world and we believe that our one stop shop mobile platform will become very attractive for such companies and that we will continue to expand the reach of our business and our path of profit and growth.

Revenues

We derive revenues from product sales, licensing, revenue share, customer services and technical support. We experienced rapid revenue growth between the years ended December 31, 2000 and December 31, 2002. Our revenues grew from $26,216 in the year ended December 31, 2000 to $1,051,975 in the year ended December 31, 2002, however, we experienced a sharp decline in our revenues during the year ended December 31, 2003 to $361,721, a decrease of 66% which management believes resulted from a generally soft telecommunications sector and demonstrates the dynamic nature of our business. A significant portion of the decline in revenues related to the decline in business from Comtrend (from $403,870 in 2002 to $11,480 in 2003. The 2002 Comtrend revenues were from the sale of the license, while in 2003 Comtrend revenues was limited to support fees.) Our growing dependency on third parties' marketing capability and our significantly reduced sales resources prevented us from achieving enough sales in that fiscal year. $361,721 in the year ended December 31, 2003 to $1,361,055 in the year ended December 31, 2004, to $2,168,434 in the year ended December 31, 2005, to $2,230,264 in the year ended December 31, 2006, to $2,295,260 in the year ended December 31, 2007, to $2,833,626 in the year ended December 31, 2008 and to $3,166,276 in the year ended December 31, 2009, Management believes that our efforts to refocus our resources towards building relationships with OEMs may yield additional contracts. Although we are in negotiations for several new contracts there can be no assurance that such contracts will be secured or that they will generate significant revenue.

When we license our MOMA Platform solutions to our customers, we generate revenues by receiving a license payment, ongoing support fees which are typically 15% of the annual license payment, and professional service fees which are generated from our customers’ request for additional training, IT administration and tailoring of our products for their specific needs. When we license our products to our customers, we install our product at a location specified by our client. We also derive revenue through our hosted services, whereby we enable customers to remotely use features of our MOMA Platform (such as a mobile content sales and delivery service for ring tones and color images), which is installed and hosted at our location, and receive a set-up fee for launching the services for them, as well as a portion of our customer's revenues generated through our platform. When we provide hosted services, we maintain the MOMA Platform at our location on behalf of our customer.

Customers and customer concentration. Historically we have derived the majority of our revenues from a small number of customers and, although our customer base is expanding, we expect to continue to do so in the future. In the year ended December 31, 2009, approximately 32% of our sales were derived from sales to Thumbplay, 21% to Arvato Mobile and 10% to Comtrend Corporation.

In the year ended December 31, 2008, approximately 45% of our sales were derived from sales to Thumbplay, 17% to Arvato Mobile and 9% to Comtrend Corporation.

Geographical breakdown. We sell our products primarily to customers in America and Europe. For the year ended December 31, 2009, we derived 76% of our revenues from sales in America, 14% from sales in Europe and 10% from sales in the Far East. Of these revenues, 69% were derived from sales by the Company, and 31% of our revenues were derived from sales by our subsidiary. For the year ended December 31, 2008, we derived 71% of our revenues from sales in America, 19% from sales in Europe and 10% from sales in the Far East. Of these revenues, 99% were derived from sales by the Company, and 1% of our revenues were derived from sales by our subsidiary

Cost of revenues

Cost of revenues represents customer services and technical support cost of revenues, which is comprised of the salaries and related costs for our technical staff that provide those services and support, and related overhead expenses.

Operating expense

Our operation expenses is comprised of research and development expenses and general and administrative expenses.

Research and development. Our research and development expenses consist primarily of salaries and related expenses of our research and development staff, as well as subcontracting expenses. All research and development costs are expensed as incurred, except equipment purchases that are depreciated over the estimated useful lives of the assets.

General and administrative. Our general and administrative expenses consist primarily of salaries and related expenses of our executive, financial, administrative and sales and marketing staff. These expenses also include costs of professional advisors such as legal and accounting experts, depreciation expenses as well as expenses related to advertising, professional expenses and participation in exhibitions and tradeshows.

Financing income and expenses

Financing income consists primarily of interest earned on our cash equivalents balances and other financial investments and foreign exchange gains. Financing expenses consist primarily of interest payable on bank loans and foreign exchange losses.

Critical Accounting Policies

We prepare our consolidated financial statements in conformity with accounting principles generally accepted in the United States. As such, we are required to make certain estimates, judgments and assumptions that we believe are reasonable based upon the information available.

These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of the periods presented. To fully understand and evaluate our reported consolidated financial results, we believe it is important to understand our revenue recognition policy.

Revenue recognition. 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". We have 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 the three stages of deliverables are complete; installation, approval of acceptance tests 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.

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.

Revenue share is recognized as earned based on a certain percentage of our clients' revenues from selling services to end users. Usage is determined by receiving confirmation from the clients.

Revenues relating to customer services and technical support are recognized as the services are rendered ratably over the period of the related contract.

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2009 COMPARED TO YEAR ENDED DECEMBER 31, 2008

Revenues

License fees and products. Revenues from license fees and products increased 65% to $795,096 for the year ended December 31, 2009 from $481,116 for the same period in 2008. The increase is primarily due to $297,428 in revenues which was derived from two contracts with two customers during 2009 that was not earned in 2008.

Revenue share. Revenues from revenue share increased 3% to $1,004,202 for the year ended December 31, 2009 from $976,771 for the same period in 2008. The increase primarily consisted of revenues from current customers who were not our customers during 2008 and from customers that did not generate revenues from selling services to end users previously.

Customer services and technical support. Revenues from customer services and technical support decreased 1% to $1,366,978 for the year ended December 31, 2009 from $1,375,739 for the same period in 2008. The decrease is primarily due to a slight decrease in orders and corresponding demand for customer services during 2009.

Cost of revenues

License fees and products. Cost of license fees and products increased 78% to $129,964 for the year ended December 31, 2009 from $73,104 for the year ended December 31, 2008. This increase was primarily due to higher revenues from license fees and products during 2009.

Customer services and technical support. Cost of customer services and technical support decreased 26% to $767,293 for the year ended December 31, 2009 from $1,032,996 for the year ended December 31, 2008. This decrease was primarily due to a decrease in payroll and related expenses during 2009.

Operating expenses

Research and development. Research and development expenses decreased 28% to $548,673 for the year ended December 31, 2009 from $758,693 for the year ended December 31, 2008. This decrease was primarily due to a $82,063 decrease in the number of employee options that vested in 2009 and an increase of $120,729 in government grant income. Research and development expenses, stated as a percentage of revenues, decreased to 17% for the year ended December 31, 2009, from 27% year ended December 31, 2008.

General and administrative. General and administrative expenses decreased 14% to $1,662,859 for the year ended December 31, 2009 from $1,940,732 for the year ended December 31, 2008. This decrease was primarily due to a $290,673 decrease in payroll and related expenses due to cost-cutting measures taken. General and administrative expenses, stated as a percentage of revenues, decreased to 53% for the year ended December 31, 2009, from 69% for the year ended December 31, 2008.

Financing income and expenses

Financing expenses. Our financing expenses decreased 61% to $24,899 for the year ended December 31, 2009 from $63,823 for the same period in 2008. This decrease was primarily due to a $62,000 expense incurred in 2008 due to warrants issued to a stockholder as compensation for non-interest bearing credit line facility that was not incurred during 2009.

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 $165,504 as of December 31, 2009 and $169,206 as of December 31, 2008. 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 “Item 13 - Certain Relationships and Related Transactions, and Director Independence”) and as of March 11, 2010 we have no lines of credit agreements with banks. We have a $500,000 credit line agreement with Miretzky Holdings Limited. As of December 31, 2009, $304,688 is outstanding under the credit line. The credit line has no termination date and does not provide for interest payments.

Other than the 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 do have an equity line for $10.0 million with Dutchess Private Equity Fund, and for the year ended December 31, 2009 we have drawn $828,675 under the Equity Line. The Equity Line is not interest bearing

We will need approximately $1.8 million for the next twelve months for our operating costs which mainly include salaries, office rent and network connectivity, which total approximately $130,000 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 year ended December 31, 2009 net cash provided by operating activities was $35,400 primarily due to our net earnings of $82,985 and $207,343 employee options vested, partially offset by a $216,131 increase in accounts receivables – trade and a $87,026 increase in government grants receivable. For the year ended December 31, 2008 we used $161,641 of cash in operating activities primarily due to our net loss of $1,035,722 and a $132,953 decrease in billings in excess of costs on uncompleted contracts, partially offset by $583,477 employee options vested and a $157,815 increase in other payables and accrued expenses

Investing and financing activities.

Property and equipment consist primarily of computers, software, and office equipment.

For the year ended December 31, 2009, net cash used in investing activities was $37,914 primarily consisting of an investment in equipment. For the year ended December 31, 2008, net cash used in investing activities was $33,769 primarily consisting of an investment in equipment.

For the year ended December 31, 2009, net cash used in financing activities was $1,188 due to a $1,188 decrease in advances from shareholders.

For the year ended December 31, 2008, net cash used in financing activities was $897 primarily due to a $4,207 decrease in advances from shareholders, partially offset by a $3,310 sale of common shares under equity financing agreement.

Going Concern

Our auditors have included an explanatory paragraph in their report on our consolidated financial statements, relating to the uncertainty of our business as a going concern, due to our limited operating history, our lack of historical profitability, and limited funds. Management believes that it will be able to raise the required funds for operations from bank financings, or from one or more future offerings, and to be able to achieve our business plan. Risks inherent in the business may affect the outcome of Management's plans.

Market Risk

We do not currently use financial instruments for trading purposes and do not currently hold any derivative financial instruments that could expose us to significant market risk.

Corporate Tax Rate

Our net operating loss carry-forwards in the United States for tax purposes amount approximately $12.0 million as of December 31, 2009.

Impact of Inflation and Currency Fluctuation

Substantially all of our revenues are denominated in dollars or are dollar-linked, but we incur a portion of our expenses, principally salaries and related personnel expenses in Israel, in New Israeli Shekels (NIS). In 2009, 51% of our costs were incurred in NIS. As a result, we are exposed to the risk that the rate of inflation in Israel will exceed the rate of devaluation of the NIS in relation to the United States Dollar or that the timing of this devaluation will lag behind inflation in Israel. In that event, the dollar cost of our operations in Israel will increase and our dollar-measured results of operations will be adversely affected.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

M-WISE, INC. AND SUBSIDIARY

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

UNAUDITED

CONTENTS

Report of Registered Independent Public Accounting Firm	1

Consolidated Balance Sheets	2

Consolidated Statements of Operations and Comprehensive Income (Loss)	3

Consolidated Statements of Stockholders' Deficit	4

Consolidated Statements of Cash Flows	5

Notes to Consolidated Financial Statements	6 - 24

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

m-Wise, Inc. and Subsidiary

We have audited the accompanying consolidated balance sheets of m-Wise, Inc. and Subsidiary (the "Company") as of December 31, 2009 and 2008, and the related consolidated statements of operations and comprehensive income (loss), stockholders' deficit and cash flows for the years ended December 31, 2009 and 2008. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2008 and the results of its operations and its cash flows for the years ended December 31, 2009 and 2008 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Toronto, Canada CHARTERED ACCOUNTANTS

March 10, 2010

- 1 -

M-WISE, INC. AND SUBSIDIARY

Consolidated Balance Sheets

As of December 31, 2009 and 2008

	2009			2008
ASSETS
Current
Cash	$	165,504		$	169,206
Short-term investment		7,837			7,769
Accounts receivable - trade (net of allowance for doubtful accounts of $12,563; 2008 - $337,940)		822,741			606,610
Prepaid expenses and other assets		47,729			35,591
Government grants receivable		87,026			-

Total Current Assets		1,130,837			819,176

Long-term Prepaid Expenses		10,930			13,523
Plant and Equipment, net (note 4)		71,891			62,927

Total Long-term Assets		82,821			76,450

Total Assets	$	1,213,658		$	895,626

LIABILITIES
Current
Accounts payable - trade	$	46,541		$	27,144
Other payables and accrued expenses (note 9)		1,136,324			1,177,780
Advances from stockholder (note 5)		304,688			305,876
Billings in excess of costs on uncompleted contracts		24,400			3,680

Total Current Liabilities		1,511,953			1,514,480
Accrued Severance Pay (note 6)		127,493			114,631

Total Liabilities		1,639,446			1,629,111

Commitments and Contingencies (note 12)

STOCKHOLDERS' DEFICIT
Capital Stock (note 7) (139,322,145 common stock; 2008 - 139,322,145 common stock)		236,848			236,848
Additional Paid-in Capital		11,850,838			11,626,126
Accumulated Deficit		(12,513,474	)		(12,596,459	)

Total Stockholders' Deficit		(425,788	)		(733,485	)

Total Liabilities and Stockholders' Deficit	$	1,213,658		$	895,626

(The accompanying notes are an integral part of these consolidated financial statements.)

- 2 -

M-WISE, INC. AND SUBSIDIARY

Consolidated Statements of Operations and Comprehensive Income (Loss)

For the Years Ended December 31, 2009 and 2008

	2009			2008

Sales
Customer services and technical support	$	1,366,978		$	1,375,739
Revenue share		1,004,202			976,771
Product sales and license		795,096			481,116

		3,166,276			2,833,626

Cost of Sales		897,257			1,106,100

Gross Profit		2,269,019			1,727,526

Expenses
General and administrative		1,662,859			1,940,732
Research and development		548,673			758,693

Total Expenses		2,211,532			2,699,425

Earnings (Loss) from Operations		57,487			(971,899	)

Other Income (Expenses)
Extinguishment of debt		50,397			-
Interest and other		(24,899	)		(63,823	)

Total Other Income (Expenses)		25,498			(63,823	)

Earnings (Loss) before Income Taxes		82,985			(1,035,722	)
Provision for Income Taxes (note 8)		-			-

Net Earnings (Loss) and Comprehensive Income (Loss)	$	82,985		$	(1,035,722	)

Earnings (Loss) Per Share - Basic and Diluted	$	0.00		$	(0.01	)

Weighted Average Number of Common Shares Outstanding - Basic and Diluted		139,322,145			139,265,378

(The accompanying notes are an integral part of these consolidated financial statements.)

- 3 -

M–WISE, INC. AND SUBSIDIARY

Consolidated Statements of Stockholders' Deficit

For the Years Ended December 31, 2009 and 2008

	Number of				Additional					Total
	Common		Capital		Paid-in		Accumulated			Stockholders'
	Shares		Stock		Capital		Deficit			Deficit

Balance, January 1, 2008		139,182,145	$	236,610	$	10,977,577	$	(11,560,737	)		(346,550	)

Share issuance pursuant to Equity Financing Agreement (note 7)		140,000		238		3,072		-			3,310

Issuance of warrants (note 7)		-		-		62,000		-			62,000

Options vested for employee services (note 7)		-		-		583,477		-			583,477

Net loss		-		-		-		(1,035,722	)		(1,035,722	)

Balance, December 31, 2008		139,322,145	$	236,848	$	11,626,126	$	(12,596,459	)	$	(733,485	)

Balance, January 1, 2009		139,322,145	$	236,848	$	11,626,126	$	(12,596,459	)	$	(733,485	)

Cancellation and reissue of warrants (note 7)		-		-		17,369		-			17,369

Options vested for employee services (note 7)		-		-		207,343		-			207,343

Net earnings		-		-		-		82,985			82,985

Balance, December 31, 2009		139,322,145	$	236,848	$	11,850,838	$	(12,513,474	)	$	(425,788	)

(The accompanying notes are an integral part of these consolidated financial statements.)

- 4 -

M–WISE, INC. AND SUBSIDIARY

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2009 and 2008

	2009			2008
Cash Flows from Operating Activities
Net earnings (loss)	$	82,985		$	(1,035,722	)
Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities:
Depreciation		28,882			42,664
Employee options vested		207,343			583,477
Issuance of warrants		-			62,000
Cancellation and reissue of warrants		17,369			-

		336,579			(347,581	)
Net changes in assets and liabilities:
Accounts receivable - trade		(216,131	)		104,172
Prepaid expenses and other assets		(9,545	)		(8,118	)
Government grants receivable		(87,026	)		-
Accounts payable - trade		19,397			(9,691	)
Other payables and accrued expenses		(41,456	)		157,815
Billings in excess of costs on uncompleted contracts		20,720			(132,953	)
Accrued severance pay		12,862			74,715

Net Cash Provided by (Used in) Operating Activities		35,400			(161,641	)

Cash Flows from Investing Activities
Acquisition of plant and equipment		(37,846	)		(26,000	)
Short-term investment		(68	)		(7,769	)

Net Cash Used in Investing Activities		(37,914	)		(33,769	)

Cash Flows from Financing Activities
Advances from stockholder		(1,188	)		(4,207	)
Sale of common shares under Equity Financing agreement		-			3,310

Net Cash Used in Financing Activities		(1,188	)		(897	)

Net Decrease in Cash		(3,702	)		(196,307	)

Cash - Beginning of Year		169,206			365,513

Cash - End of Year	$	165,504		$	169,206

Interest and Income Taxes Paid
During the year, the Company had cash flows arising from income taxes and interest paid as follows:
Interest	$	178		$	475

Income taxes	$	-		$	-

(The accompanying notes are an integral part of these consolidated financial statements.)

- 5 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

1.	Description of Business and Going Concern

Description of Business

m-Wise Inc. (the "Company") is a Delaware corporation that develops interactive messaging platforms for mobile phone-based commercial applications, transactions, and information services with internet billing capabilities.

The Company's wholly-owned subsidiary, m-Wise Ltd., is located in Israel and was incorporated in 2000 under the laws of Israel.

Going Concern

The Company's consolidated 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 negative working capital that raises substantial doubt as to its ability to continue as a going concern. For the years ended December 31, 2009 and 2008, the Company experienced a working capital deficit of $381,116 (2008 - $695,304).

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 continued profitable operations.

The Company is pursuing additional financing, but there can be no assurance that the Company will be able to secure financing when needed or obtain financing on terms satisfactory to the Company, if at all.

The consolidated 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.

- 6 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

2.	Summary of Significant Accounting Policies

The accounting policies of the Company are in accordance with generally accepted accounting principles in the United States of America, and their basis of application is consistent with that of the previous year. Outlined below are those policies considered particularly significant:

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.

Basis of Consolidation

The consolidated financial statements include the operations of m-Wise, Inc. and its wholly-owned subsidiary. Intercompany balances and transactions have been eliminated on consolidation.

Short-term Investment

Short-term investment is carried at fair value, which is quoted market value and consists of a term deposit.

Plant and Equipment

Plant and equipment is stated at cost. Depreciation is based on the estimated useful lives of the related assets and is provided using the undernoted annual rates and methods:

Furniture and equipment		6-15	%	Straight line
Computer equipment		33	%	Straight line
Leasehold improvements	2 to 5 years			Straight line

- 7 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

2.	Summary of Significant Accounting Policies (cont'd)

Revenue Recognition

The Company generates revenues from product sales, licensing, customer services, technical support and revenue share.

Revenue from product 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 are 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 operate without on-going support. Revenues relating to customer services and technical support are recognized as the services are rendered ratably over the period of the related contract.

Revenue share is recognized as earned based on a certain percentage of the Company's clients' revenues from selling services to end users. Usage is determined by receiving confirmation from the clients.

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.

- 8 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

2.	Summary of Significant Accounting Policies (cont'd)

Research and Development Costs

Research and development costs are expensed as incurred.

Government Grants

Government grants are recorded when the payments to be received can be estimated and when reasonable assured. The Company has accounted for the grants as an offset to research and development expenses.

Long-lived Asset Impairment

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Recoverability is assessed based on the carrying amount of a long-lived asset compared to the sum of the future undiscounted cash flows expected to result from the use and the eventual disposal of the asset. An impairment loss is recognized when the carrying amount is not recoverable and exceeds fair value.

Use of Estimates

The preparation of financial statements, in conformity with generally accepted accounting principles in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The following is a list of significant estimates:

Estimated useful lives of assets

Valuation of accounts receivable

Valuation of stock options

Accrued severance pay

Accrued expenses

Foreign Currency Translation

Monetary items denominated in foreign currencies are translated into US dollars at the foreign currency exchange rate in effect at each balance sheet date. Non-monetary items in foreign currencies are translated into US dollars at historical rates of exchange except for those carried at market which are translated at the foreign currency exchange rate in effect at each balance sheet date. Revenues and expenses denominated in foreign currencies are translated into US dollars at the weighted average foreign currency exchange rate for the year. Translation gains and losses are included in determining net earnings.

- 9 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

2.	Summary of Significant Accounting Policies (cont'd)

Loss per Common Share

The Company calculates net loss per share based on SFAS No. 128, "Earnings Per Share". Basic loss per share is computed by dividing the net loss attributable to the common stockholders by the weighted average number of common shares outstanding. Diluted loss per share is computed similar to basic loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive.

Impact of Recently Issued Accounting Standards

In May 2009, FASB issued SFAS 165 “Subsequent Events”, (“SFAS 165”), which establishes general standards for accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or available to be issued. In particular, SFAS 165 sets forth the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its consolidated financial statements’ and the disclosures that an entity should make about events or transactions that occurred after the balance sheet date. It is effective for interim and annual periods ending after June 15, 2009. The Company adopted SFAS 165 effective June 15, 2009. The adoption of SFAS 165 did not impact the Company’s financial position or results of operations.

In June 2009, the FASB issued SFAS 166 "Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140." This standard eliminates the concept of a qualifying special purpose entity ("QSPE") and modifies the derecognition provisions in SFAS 140. This statement is effective for financial asset transfers occurring after the beginning of an entity's first fiscal year that begins after November 15, 2009. The Company is currently reviewing the effect, if any, the proposed guidance will have on its consolidated financial statements.

In June 2009, the FASB issued SFAS 167 "Amendments to FASB Interpretation No. 46(R)." This statement amends the consolidation guidance applicable to variable interest entities and is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2009. The Company is currently reviewing the effect, if any, the proposed guidance will have on its consolidated financial statements.

- 10 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

2.	Summary of Significant Accounting Policies (cont'd)

Impact of Recently Issued Accounting Standards (cont'd)

In June 2009, the FASB issued SFAS 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No. 162” (“SFAS 168”). SFAS 168 provides for the FASB Accounting Standards Codification (the “Codification”) to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles (GAAP). The Codification did not change GAAP but reorganizes the literature. SFAS 168 is effective for interim and annual periods ending after September 15, 2009. The Company adopted SFAS 168 effective September 15, 2009. The adoption of SFAS 168 did not impact the Company’s financial position or results of operations.

In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, “Measuring Liabilities at Fair Value” (“ASU 2009-05”), which clarifies, among other things, that when a quoted price in an active market for the identical liability is not available, an entity must measure fair value using one or more specified techniques. ASU 2009-05 was effective for the first reporting period, including interim periods, beginning after issuance. The Company adopted the update effective January 1, 2009 with no impact on its consolidated financial statements.

In October 2009, the FASB issued ASU 2009-13, “Multiple-Deliverable Revenue Arrangements” (“ASU 2009-13”). ASU 2009-13 applies to revenue arrangements currently in the scope of FASB ASC Subtopic 605-25, “Multiple Element Arrangements”, and provides principles and application guidance on whether arrangements with multiple deliverables exist, how the deliverables should be separated, and the consideration allocated to the deliverables. ASU 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010. The Company is currently reviewing the effect, if any, the proposed guidance will have on its consolidated financial statements.

In December 2009, the FASB issued ASU 2009-17 which codifies SFAS No. 167, “Amendments to FASB Interpretations No. 46(R)” issued in June 2009. ASU 2009-17 requires a qualitative approach to identifying a controlling financial interest in a variable interest entity (“VIE”), and requires ongoing assessment of whether an entity is a VIE and whether an interest in a VIE makes the holder the primary beneficiary of the VIE. ASU 2009-17 is effective for annual reporting periods beginning after November 15, 2009. The Company does not expect the adoption of ASU 2009-17 to have a material impact on its consolidated financial statements.

In January 2010, the FASB issued ASU 2010-06, “Improving Disclosures about Fair Value Measurements” (“ASU 2010-6”). The standard amends ASC Topic 820, “Fair Value Measurements and Disclosures” to require additional disclosures related to transfers between levels in the hierarchy of fair value measurements. ASU 2010-6 is effective for interim and annual fiscal years beginning after December 15, 2009. The standard does not change how fair values are measured, accordingly the standard will not have an impact on the Company’s consolidated financial statements.

- 11 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

3.	Financial Instruments

Unless otherwise noted, it is management's opinion that the Company is not exposed to significant interest, currency or credit risks arising from the financial instruments.

Credit risk

SFAS No. 105, "Disclosure of Information About Financial Instruments with Off-Balance- Sheet Risk and Financial Instruments with Concentration of Credit Risk" ("SFAS No. 105"), 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 Israeli financial institutions.

The Company 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.

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.

Financial instruments that are potentially subject to credit risk consist principally of trade receivables. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

As of December 31, 2009, the Company had three major customers which primarily accounted for 22%, 20% and 19% of total accounts receivable. For the year ended 2008, the Company had three major customers which accounted for 20%, 21% and 15% of total accounts receivable.

Currency Risk

The Company is exposed to currency risk due to its revenues derived from sales to Europe and South America. A certain portion of the Company’s revenues are in European euro or Brazilian Real currency, resulting in European euro and Brazilian Real denominated accounts receivable and revenues. These activities result in exposure to fluctuations in foreign currency rates between the European euro and Brazilian real and the US dollar. The following assets originate in European euro and Brazilian real and are subject to fluctuations:

Current assets

114,159

- 12 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

4.	Plant and Equipment

Plant and equipment is comprised of the following:

			2009				2008
			Accumulated				Accumulated
	Cost		Depreciation		Cost		Depreciation

Furniture and equipment	$	73,559	$	42,590	$	69,940	$	37,405
Computer equipment		174,978		134,292		140,751		110,701
Leasehold improvements		2,592		2,356		2,592		2,250

	$	251,129	$	179,238	$	213,283	$	150,356

Net carrying amount			$	71,891			$	62,927

Depreciation expenses of $26,245 (2008 - $39,086) and $2,637 (2008 - $3,578) have been included in research and development, and general and administrative expenses, respectively.

5.	Advances from Stockholder

The advances from the Company's major stockholder are non-interest bearing, unsecured and have no fixed terms of repayment. According to an agreement dated January 2003, the stockholder granted a credit facility of $500,000 to the Company in return for preferred class "C" shares as described in note 7. As of December 31, 2009 and 2008, the line of credit had an outstanding balance of $304,688 and $305,876, respectively.

6.	Accrued Severance Pay

The Company accounts for its potential severance liability of its Israeli 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 December 31, 2009 and 2008, the amount of the liabilities accrued were $353,880 and $272,653, respectively. Severance pay expenses for the years ended December 31, 2009, and 2008 were $75,096 and $105,951 respectively.

The Company makes monthly payments to the severance funds with insurance companies, that the employees choose. 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.

- 13 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

6.	Accrued Severance Pay (cont'd)

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 of December 31, 2009, and 2008, were $226,387 and $158,022, respectively. Income earned from the deposit funds for 2009 and 2008 was immaterial.

7.	Capital Stock

Authorized:

210,000,000 Common stock, par value $0.0017 per share

170,000,000 Preferred stock

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

			2009		2008
Issued:
	139,322,145	Common stock (2008 - 139,322,145)	$	236,848	$	236,848

Stock Options and Warrants:

The Company has accounted for its stock options and warrants in accordance with SFAS No. 123(R) "Share-Based Payments" ("FAS No. 123(R)"), and SFAS No. 148, "Accounting for Stock - Based Compensation - Transition and Disclosure - an amendment of FASB Statements No. 123" ("SFAS No. 148"). The 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:

	2009						2008
	Israel			International			Israel			International
Interest rate		2.1	%		2.1	%		1.2	%		1.2	%
Expected volatility		122	%		122	%		138	%		138	%
Expected life in years		2.00			4.00			3			5

- 14 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

7.	Capital Stock (cont'd)

Warrants

In April 2000, 56,180 warrants, equivalent to 337,080 shares after the Company's six-for-one forward stock split, were issued to one of the stockholders with his preferred Class "A" shares for a total investment of $750,000. The warrants will expire in the event of an initial public offering of the Company's securities. The warrants have an exercise price for preferred Class "A" shares of the Company at $4.45 per share, equivalent to $0.74 after the six-for-one 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 one-to-one basis in 2003.

In January 2003, the Company issued warrants to purchase 180,441 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 ended December 31, 2003 at a ratio of 1-to-6.3828125. After the conversion, the warrants were further split at the ratio of one-to-six in accordance with the forward stock split of the common shares. After the conversion and the forward split, there were warrants to purchase 7,025,778 shares outstanding.

On April 4, 2007, 505,732 of the above warrants have been converted into common shares and the number of warrants outstanding as at December 31, 2009 was 6,520,046.

On December 22, 2005, the Company entered into an agreement with Syntek Capital AG ("Syntek"), as part of the agreement for conversion of the note payable into common shares, whereby the Company issued warrants to purchase up to 5,263,158 common shares of the Company at an exercise price of $0.19. As of December 31, 2009, the warrants have not been converted into common stock.

On February 2, 2006, the Company entered into an identical agreement with DEP Technology Holdings Ltd. The value assigned to the warrants was $218,114. As of December 31, 2009, the warrants have not been converted into common stock.

On December 29, 2008, the Company issued warrants to a stockholder as compensation for non-interest bearing credit line facility provided from March 2004 to December 31, 2008, which was valued at $62,000. The stockholder can purchase up to 4,000,000 common shares of the Company at an exercise price of $0.04. The warrants will expire in 2012.

On December 18, 2009, the exercise price of the 5,263,158 warrants originally issued to Syntek was changed to $0.015, resulting in additional compensation cost of $17,369 included in interest and other.

- 15 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

7.	Capital Stock (cont'd)

Capital Stock:

On March 6, 2007, the Company exercised its right pursuant to the February 6, 2006 equity financing agreement with Dutchess Private Equity Fund ("DPEF"). The agreement entitled the Company to sell up to 20,000,000 of the Company's common shares (to maximum of $10,000,000) over the course of 36 months. The amount that the Company shall be entitled to request from each of the purchase "Puts", shall be equal to either 1) $300,000 or 2) 200% of the average daily volume ("ADV") multiplied by the average of the three daily closing prices immediately preceding the Put date. The ADV shall be computed using the 10 trading days prior to the Put Date. The Purchase Price for the common stock identified in the Put Notice shall be set at 93% of the lowest closing bid price of the common stock during the Pricing Period. The Pricing Period is equal to the period beginning on the Put Notice date and ending on and including the date that is five trading days after such Put Date. There are put restrictions applied on days between the Put Date and the Closing Date with respect to that Put. During this time, the Company shall not be entitled to deliver another Put Notice.

In connection with the equity financing agreement, the Company has issued a preliminary prospectus whereby the DPEF and a current significant stockholder can sell up to 30,000,000 common shares at market value. During the year ended December 31, 2007, 6,515,483 common shares were issued under the agreement for $825,365.

During the year ended December 31, 2008, 140,000 common shares were issued under the DPEF equity financing agreement for $3,310.

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.

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 December 31, 2009, 3,672 options under the Israel 2001 Share Option Plan for common stock were not yet granted and available for future grant.

- 16 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

7.	Capital Stock (cont'd)

Stock Options (cont'd):

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, 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. On January 5, 2006, the share option plan was amended to authorize an additional 1,260,000 stock options and the exercise price per share for the new options will be $0.12 for options granted after January 5, 2006. On August 14, 2006, the share option plan was amended to authorize an additional 6,000,000 stock options at an exercise price of $0.04. On June 16, 2008, the exercise price of 17,080,000 options granted under the Israel 2003 Stock Option Plan and 15,750,000 options granted under the 2003 International Share Option Plan was amended to $0.03. 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. As of December 31, 2009, 38,256 options under the Israel 2003 Stock Option Plan were not yet granted and available for future grant.

On January 4, 2008, 500,000 stock options at an exercise price of $0.09 were granted under the International 2003 Share Option Plan.

On June 16, 2008, the Company reduced the exercise price of 17,080,000 options in its Israel 2003 Stock Option Plan and 15,750,000 options in the International 2003 Share Option Plan to $0.03, resulting in additional compensation costs of $41,059 in accordance with SFAS 123(R), Paragraph A150. $35,229 and $5,830 were included in general and administrative and research and development expenses, respectively.

On December 29, 2008, 11,000,000 stock options at an exercise price of $0.04 and 400,000 stock options at an exercise price of $0.02 were granted under the International 2003 Share Option Plan.

On December 29, 2008, 500,000 stock options at an exercise price of $0.04 and 8,000,000 stock options at an exercise price of $0.02 were granted under the Israel 2003 Stock Option Plan.

On August 3, 2009, the Company reduced the exercise price of 5,000,000 options in its Israel 2003 Stock Option Plan and 11,000,000 options in the International 2003 Share Option Plan to $0.02, resulting in additional compensation costs of $28,800 in accordance with SFAS 123(R), Paragraph A150. $28,800 was included in general and administrative expense.

On August 18, 2009, 180,000 stock options at an exercise price of $0.02 were granted under the International 2003 Share Option Plan.

- 17 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

7.	Capital Stock (cont'd)

Stock Options (cont'd):

On August 25, 2009, 60,000 stock options at an exercise price of $0.0017 were granted under the International 2003 Share Option Plan.

On October 22, 2009, 200,000 stock options at an exercise price of $0.03 were granted under the International 2003 Share Option Plan.

On December 30, 2009, 4,000,000 stock options at an exercise price of $0.02 and 7,000,000 stock options at an exercise price of $0.03 were granted under the International 2003 Share Option Plan.

On December 30, 2009, 13,000,000 stock options at an exercise price of $0.02 were granted under the Israel 2003 Stock Option Plan.

The options vest gradually over a period of four years from the date of grant for the Israel Plan and ten 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 eight years from the date of grant in Israel and ten years from the date of grant in the International Plan. The outstanding options that have vested have been expensed in the consolidated statements of operations as follows:

Year ended December 31, 2001	$	9,000
Year ended December 31, 2002		-
Year ended December 31, 2003		384,889
Year ended December 31, 2004		25,480
Year ended December 31, 2005		13,733
Year ended December 31, 2006		117,044
Year ended December 31, 2007		181,622
Year ended December 31, 2008		583,477
Year ended December 31, 2009		207,343

	$	1,522,588

- 18 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

7.	Capital Stock (cont'd)

Stock Options (cont'd):

The following table summarizes the activity of common stock options during 2009 and 2008:

	2009				2008
	Israel		International		Israel			International

Outstanding, beginning of year		25,901,400		28,176,797		18,209,767			16,776,797
Granted		13,000,000		11,440,000		8,500,000			11,900,000
Forfeited		-		-		(808,367	)		(500,000	)

Outstanding, end of year		38,901,400		39,616,797		25,901,400			28,176,797

Weighted average fair value of options granted during the year	$	0.0157	$	0.0153	$	0.0160		$	0.0172

Weighted average exercise price of common stock options, beginning of year	$	0.0315	$	0.0356	$	0.0493		$	0.0792

Weighted average exercise price of common stock options granted in the year	$	0.0200	$	0.0262	$	0.0318		$	0.0414

Weighted average exercise price of common stock options, end of year	$	0.0262	$	0.0286	$	0.0315		$	0.0356

Weighted average remaining contractual life of common stock options	2.5 years		2.63 year		2.72 years			3.08 years

8.	Income Taxes

The Company accounts for income taxes in accordance with SFAS No. 109, "Accounting for Income Taxes" ("SFAS No.109"). 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.

- 19 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

8.	Income Taxes (cont'd)

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 the values of its assets and liabilities recorded for financial reporting purposes are not materially different from their values for income tax purposes and therefore, no deferred tax assets/liabilities have been recorded in the accompanying financial statements to account for the temporary differences.

There are no differences between the Company's reported income tax expense on operating income and the expense that would otherwise result from the application of statutory rates. The Company's non capital loss carryforwards are being used to offset the current income tax expense.

The Company has deferred income tax assets as follows:

	2009			2008

Deferred income tax assets
Loss carryforwards	$	3,027,000		$	3,049,000
Less: Valuation allowance		(3,027,000	)		(3,049,000	)

Total net deferred tax assets	$	-		$	-

For the years ended 2009 and 2008, 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.

As of December 31, 2009, the Company had approximately $11,915,000 tax loss carryforwards in the United States. Tax loss carryforwards in the United States, if not utilized, will expire in 20 years from the year of origin as follows:

December 31, 2020	$	751,500
2021		2,398,000
2022		778,000
2023		5,005,000
2024		581,000
2025		560,500
2026		196,000
2027		700,000
2028		945,000
	$	11,915,000

As of December 31, 2009, the Company had approximately $187,000 (2008 - $112,000) in tax losses in its Israeli subsidiary which will carryforward indefinitely.

- 20 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

9.	Related Party Transactions

During the year ended December 31, 2009, the Company incurred directors' consulting fees and salaries in the amount of $139,992 (2008 - $139,992). As of December 31, 2009, $623,924 (2008 - $570,392) was 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 related parties.

10.	Significant Customers

In 2009, the Company had three major customers which primarily accounted for 32%, 21%, and 10% of total revenues. In 2008, the Company had two major customers which accounted for 45%, 17% of total revenues.

11.	Segmented Information

		Israel			USA			Total

Gross revenue	December 31, 2009	$	995,165		$	2,171,111		$	3,166,276
	December 31, 2008	$	31,784		$	2,801,842		$	2,833,626
Net income (loss)	December 31, 2009	$	(13,537	)	$	96,522		$	82,985
	December 31, 2008	$	(112,357	)	$	(923,365	)	$	(1,035,722	)
Total assets	December 31, 2009	$	636,617		$	577,041		$	1,213,658
	December 31, 2008	$	134,107		$	761,519		$	895,626

In 2009, the Company derived 10% (2008 - 10%) of its revenues from sales to the Far East, 14% from sales to Europe (2008 - 19%) and 76% (2008 - 71%) from sales to America.

- 21 -

M–WISE, INC. AND SUBSIDIARY

Notes to Consolidated Financial Statements

December 31, 2009 and 2008

12.	Commitments and Contingencies

The Company is committed under an operating lease for its premises expiring June 30, 2011. Minimum annual payments (exclusive of taxes, insurance, and maintenance costs) are as follows:

2010	$	85,300
2011		38,400

	$	123,700

In addition, the Company is committed under operating vehicle leases as follows:

2010	$	77,781
2011		45,852
2012		18,302

	$	141,935

Rent expense paid in 2009 and 2008 was $63,768 and $75,950, respectively.

- 22 -

13.	Fair Value Measurements

Effective January 1, 2008, the Company adopted SFAS 157, except as it applies to the nonfinancial assets and nonfinancial liabilities subject to FSP SFAS 157-2. SFAS 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, SFAS 157 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

Level 1 -

Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 -

Include other inputs that are directly or indirectly observable in the marketplace.

Level 3 -

Unobservable inputs which are supported by little or no market activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

Cash and short-term investment (level 1), accounts receivable-trade, government grants receivable, accounts payable-trade, other payables and accrued expenses and advances from stockholder (level 2) are reflected in the consolidated balance sheets at carrying value, which approximates fair value due to the short-term nature of these instruments.

The fair value of the financial instruments approximates their carrying values, unless otherwise noted.

- 23 -

14.	Government Grants

During the year 2009 the Israeli subsidiary was authorized to receive approximately $253,000 from the Israeli government grant program. The Israeli subsidiary is required to pay the government agency royalties in the amount of 3% of gross sales from the products and services being developed relating to the grant during the initial 2 years and 3.5% per annum thereafter. As at December 31, 2009 the Company received approximately $33,700 and no royalties have been paid. The amount was recorded as a reduction of the research and development expense incurred in the year. The Company expects to complete the project in 2010.

15.	Subsequent Events

Exercise of Warrants:

On January 17, 2010, 2,248,251 warrants were converted into 2,057,149 common shares, in a cashless exercise.

On January 12, 2010, 5,263,158 warrants were converted into 5,263,158 common shares at an exercise price of $0.015 per warrant, cash received was $79,633.

Consulting Agreements

Pursuant to a certain M&A Consulting Services Agreement dated January 4, 2010 between the Company and Euronet Securities Limited ("Euronet"), Euronet is entitled to receive 750,000 shares of common stock in exchange for consulting services from January 4, 2010 to July 4, 2010. On February 1, 2010, the Company issued 750,000 common shares, valued at $30,000 which is equal to an aggregate monthly fee of $5,000 for the 6 months.

Pursuant to a certain Consulting and Participation Agreement dated effective January 10, 2010 between the Company and TMT Strategic Advisors ("TMT"), TMT is entitled to receive 1,000,000 shares of common stock, which were valued at $20,000. TMT has agreed to serve as the Company's non-exclusive consultant and explore opportunities with companies that may be interested in purchasing the Company's products or services or entering into other business transactions with the Company, arrange introductions and contacts between the Company and such companies, and shall provide support where requested to assist in any resulting transactions between the Company from January 10, 2010 to July 10, 2010.

Pursuant to a certain Consulting and Participation Agreement dated effective January 17, 2010 between the Company and Shmulik Yannay, Adv, ("Yannay"), Yannay is entitled to receive 1,000,000 shares of common stock, which were valued at $20,000. Yannay has agreed to serve as the Company's non-exclusive consultant and explore opportunities with companies that may be interested in entering into M&A or other business transactions with the Company, arrange introductions and contacts between the Company and such companies, and shall provide support where requested to assist in any resulting transactions between the Company from January 17, 2010 to July 17, 2010.

- 24 -

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

On February 23, 2009, we terminated our engagement with Davis Accounting Group P.C. (‘Davis”) as our registered independent auditors. On February 23, 2009, we retained SF Partnership LLP, Chartered Accountants (“SF”), to serve as our new registered independent auditors. SF have provided an audit report on our consolidated financial statements as of December 31, 2009 and 2008 included in this Annual Report.

We decided to terminate our engagement with Davis as part of the efforts to reduce operating expenses of our Company. This decision was accepted and ratified by our Board of Directors as of February 23, 2009. The decision to retain SF was also recommended and approved by our Board of Directors.

The reports of Davis on our consolidated financial statements for the years ended December 31, 2006, and 2007, contained no adverse opinion or disclaimer of opinion, nor were they qualified or modified as to audit scope or accounting principles, except as to uncertainty regarding our ability to continue as a going concern. In addition, from the date of Davis’ engagement, through the date of the termination of the engagement, we had no disagreements with them on any matter of accounting principles or practices, financial statement disclosure, or auditing cope or procedure, which disagreements, if not resolved to their satisfaction, would have caused them to make reference to the subject matter of the disagreements in their report. In addition, during that time period, no “reportable events” occurred, as described in Item 304(a)(1)(iv) of Regulation S-K.

We did not consult with SF prior to the date of engagement regarding the application of accounting principles, the type of audit opinion that might be rendered by it or any other similar matter.

ITEM 9A[T]. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures and Changes in Internal Control over Financial Reporting

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2009. In designing and evaluating our disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applied its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on this evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2009, our disclosure controls and procedures were effective to provide reasonable assurance that (i) material information relating to us is made known to our chief executive officer and chief financial officer by others within the Company, as appropriate to allow timely decisions regarding required disclosures, and (2) information required to be disclosed by us in our reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

Management’s Responsibility for Financial Statements

Our management is responsible for the integrity and objectivity of all information presented in this Annual Report on Form 10-K. The consolidated financial statements were prepared in conformity with accounting principles generally accepted in the United States of America and include amounts based on management’s best estimates and judgments. Management believes the consolidated financial statements fairly reflect the form and substance of transactions and that the financial statements fairly represent the Company’s financial position and results of operations.

Management’s Report on Internal Control Over Financial Reporting

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act as a process designed by, or under the supervision of, a company’s principal executive and principal financial officers, or persons performing similar functions, and effected by a company’s board of directors, management and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal control over financial reporting includes those policies and procedures that:

•

pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of a company’s assets;

•

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of the company’s management and directors; and

•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of a company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2009. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework.

Based on our assessment, our management has concluded that, as of December 31, 2009, our internal control over financial reporting was effective based on those criteria.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management's report in this annual report.

Changes in Internal Control Over Financial Reporting

There were no changes during the quarter ended December 31, 2009 in our internal control over financial reporting or in other factors that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE

DIRECTORS AND EXECUTIVE OFFICERS

The members of our Board of Directors serve until the next annual meeting of stockholders, or until their successors have been elected. The officers serve at the pleasure of the Board of Directors. The following are our directors and executive officers. All officers dedicate their full business time to our operations.

NAME	AGE	POSITION
Mordechai Broudo	51	Chairman of the Board & Secretary
Shay Ben-Asulin	41	Director
Zach Sivan	39	Chief Executive Officer
Gabriel Kabazo	37	Chief Financial Officer
Asaf Lewin	44	Chief Technology Officer

MR. MORDECHAI BROUDO is one of our co-founders and has been a director since our inception. Mr. Broudo has been acting as our Secretary and Chairman of the Board of Directors since February 2007 and served as our Chief Executive Officer from June 2001 to February 2007. Before founding m-Wise, Mr. Broudo was the Chief Technology Officer of Need2Buy.com, Inc., now known as River One Inc., which was funded by Mitsubishi and several leading venture capital firms, from November 1999 to March 2000. River One provides management software and services for manufacturers to control processes between customers and suppliers. From January 1997 to April 1998, Mr. Broudo served as the Managing Director of the New York office of Mercado DTL, a provider of advanced intelligent data management systems. Mr. Broudo received a Bachelors Degree in Computer Science from Queens College, New York, in 1991.

Mr. Broudo’s extensive leadership experience and career with innovative companies in the technology sector provides the Board valuable expertise and perspective applicable to m-Wise’s employment of complex technology applications in its worldwide operations. Mr. Broudo’s business management experience also provides valuable insight into fiscal management and business development.

MR. SHAY BEN-ASULIN is one of our co-founders and has been a director since our inception. Mr. Ben-Asulin also served as our Secretary and Chairman of the Board of Directors from June 2001 until February 2007, focusing mainly on our European operations, corporate strategy and funding and product planning. Before founding m-Wise, Mr. Ben-Asulin served as the Business Development and Wireless Content Manager, from April 1999 to March 2000, of PassCall Advanced Technologies Ltd., an Israeli start-up company based in New York, focused on web-based content and applications to wireless phones. In this position, Mr. Ben-Asulin acquired extensive knowledge and expertise of the wireless communications market, and developed sales and business development channels with US cellular operators, system integrators and media companies. From January 1998 to September 1999, Mr. Ben-Asulin served as the Chief Executive Officer of Mishin Investments Ltd., a privately-owned company that promoted multinational projects and investments in the Middle East region through business alliances in Israel and countries such as Jordan, Oman, Qatar and Egypt.

Mr. Ben-Asulin’s extensive experience and knowledge of international business operations and telecom and IT industries is particularly useful to the Board given the global presence and nature of the operations of the Company.

MR ZACH SIVAN has served as our Chief Executive Officer since February 2007 and has served as our vice president sales & marketing since January 2002. Mr. Sivan has a proven track record in sales, business development, distribution channel development and M&A within the telecoms and enterprise messaging industries. As vice president business development for Onset Technology, a messaging software provider, Mr. Sivan led the company's European sales and strategic alliances with large vendors. His prior background also includes serving as vice president planning & business development at New E-mail Communication Systems, and as an advocate at Tunik & Co. Law firm.

MR. GABRIEL KABAZO, CPA, has served as our Chief Financial Officer since October 2002. From August 2000 to September 2002, Mr. Kabazo was the Controller of On Track Innovations Ltd., a high-tech manufacturing company in the business of contactless smart cards traded on the NASDAQ, with several subsidiaries worldwide (North America, South Africa, Asia and Europe) and over 200 employees, where he supervised the finance and accounting activities of the various subsidiaries, the ongoing management of the accounting department, preparation of budget plans, financial reports and reports to the SEC. Mr. Kabazo has led several initiatives to enhance efficiency and reduce company spending as required from market conditions and played a principal role in the preparation of On Track Innovations Ltd.'s public offering, working closely with company management, external attorneys and underwriters. From December 1997 to July 2000, Mr. Kabazo worked as a CPA, Senior Level, at Luboshitz Kasierer, one of Israels leading CPA firms. Mr. Kabazo received a Bachelors Degree in Accounting and Economics from the Faculty of Management of Tel-Aviv University in 1997, a Masters Degree in Business Administration from the Sauder School of Business of the University of British Columbia in 2006 and is a Certified Public Accountant registered in Israel since 1999.

MR. ASAF LEWIN has served as our Chief Technology Officer since June 2001. From March 2000 to September 2000, Mr. Lewin was a co-founder and managing director at eCaddo Ltd., an Israeli start-up company in the field of scheduling/pricing solutions for online directories. From 1995 to March 2000,Mr. Lewin oversaw the development of several extensive visual reconnaissance systems at Elron Software (a wholly owned subsidiary of Elron Electronic Industries and a recognized global leader in the development of innovative technology products and services for advanced networking and Internet infrastructures), in the capacity of division manager. Prior to his engagement by Elron Software in 1995, Mr. Lewin was engaged by the development team at the Israeli Air Force Avionics Software Center, where he participated in numerous research and development projects in a variety of languages and development environments. He was honored with an award of excellence from the Israeli Air Force Commander for a certain project. Mr. Lewin received a Bachelors Degree (cum laude) in Aeronautical Engineering from the Israeli Technion (the Israel Institute of Technology) in 1988.

BOARD COMMITTEES

We do not have a standing audit committee, nominating committee or compensation committee. Because of our small size and the risk attendant to a small public company, we are currently unable to attract an audit committee financial expert to our Board of Directors, although we continue to seek an expert.

BOARD LEADERSHIP STRUCTURE AND BOARD ROLE IN RISK OVERSIGHT

Board Leadership Structure

Since February 2007, Mordechai Broudo has served as the Chairman of the Board and Zach Sivan as the Chief Executive Officer of the Company.

The Board recognizes that the leadership structure and combination or separation of the CEO and Chairman roles is driven by the needs of the Company at any point in time. The leadership structure at the Company has varied over time and has included combined roles, election of a presiding director, separation of roles, and other transition arrangements for succession planning. As a result, no policy exists requiring combination or separation of leadership roles and the Company’s governing documents do not mandate a particular structure. This has allowed the Board the flexibility to establish the most appropriate structure for the Company at any given time.

The Board has determined that the Company and its stockholders are currently best served by separating the CEO and Chairman roles as it provides effective risk oversight, and provides that independent Directors oversee such critical items as the Company’s financial statements, executive compensation, the selection and evaluation of directors and the day to day management of the Company.

Risk Oversight

The Board of Directors is responsible for overseeing the overall risk management process at the Company. Risk management is considered a strategic activity within the Company and responsibility for managing risk rests with executive management while the Board participates in the oversight of the process. Specifically, the Board has responsibility for overseeing the strategic planning process and reviewing and monitoring management’s execution of the corporate and business plan.

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934 requires our directors, executive officers and any person who owns more than 10% of our common stock (the "Reporting Persons") to file with the Securities and Exchange Commission reports of ownership and reports of changes in ownership of our common stock. Under Securities and Exchange Commission rules, we are to receive copies of all Section 16(a) forms that these Reporting Persons file. Based solely on our review of the copies of such forms received by us, or written representations from the Reporting Persons, we believe that during the fiscal year ended December 31, 2009, the following transaction were reported late or not reported:

Name

Number of Late

Reports

Number of Transactions

Not

Reported on a Timely Basis

Failure to File

Requested Forms

Gabi Kabazo

Mordechai Broudo

Shay Ben Asulin

Zach Sivan

CODE OF ETHICS

In April 2005, we adopted a code of ethics for our principal executive officer and senior financial officer. The Code of Ethics requires that senior management avoid conflicts of interest; maintain the confidentiality of information relating to our company; engage in transactions in shares of our common stock only in compliance with applicable laws and regulations and the requirements set forth in the Code of Ethics; and comply with other requirements which are intended to ensure that such officers conduct business in an honest and ethical manner and otherwise act with integrity and in the best interest of our Company. The code of ethics was filed with the SEC on April 14, 2005 as Exhibit 14 to our Annual report on Form 10-KSB.

FAMILY RELATIONSHIPS

There are no familial relationships between our directors and officers.

ITEM 11.EXECUTIVE COMPENSATION

The following table sets forth the cash and all other compensation paid to our executive officers and directors during 2007, 2008 and 2009, including compensation from our subsidiary. The remuneration described in the table includes our cost of any benefits which may be furnished to the named executive officers, including premiums for health insurance and other benefits provided to such individual that are extended in connection with the conduct of our business.

Summary Compensation Table for 2007, 2008 and 2009

Name and principal position	Year		Salary $ (1)	Bonus $		Stock Awards $	Option Awards $ (2)		Non-equity Incentive-Plan Compensation $	All Other Compensation $		Total $
Zach Sivan		2009	152,200		—	—		110,600	—		—	262,800
CEO		2008	117,915		—	—		71,500	—		—	189,415
		2007	77,685		—	—		148,900	—		—	226,585

Gabi Kabazo		2009	108,000		—	—		63,200	—		—	171,200
CFO		2008	108,000		—	—		50,050	—		—	158,050
		2007	81,000		—	-		101,150	—		—	182,150

Mordechai Broudo		2009	109,992		—	—		104,300	—		—	214,292
Chairman		2008	109,992		—	—		100,100	—		—	210,092
		2007	109,992		—	—		202,300	—		—	312,292

(1) The amounts shown for Mr. Broudo include $109,992 accrued but not paid for each of 2007, 2008 and 2009 for his services as Chairman. .He did not receive any additional compensation for his other duties as a director.

(2) The amounts shown represent the aggregate grant date fair value of the options issued computed in accordance with FASB ASC Topic 718.

Director Compensation for 2009

The following table sets forth information regarding the compensation paid to Shay Ben Asulin, our sole non-employee director, who served as our director during the 2009 fiscal year. Compensation to Mordechai Broudo for his services as a director is included in the Summary Compensation Table:

	Fees
	Earned						Nonqualified
	or Paid					Non-Equity	Deferred
	in		Stock	Option		Incentive Plan	Compensation		All Other
	Cash		Awards	Awards		Compensation	Earnings		Compensation	Total
Name	($)		($)	($)		($)	($)		($)	($)
Shay Ben Asulin		30,000	—		—	—		—	—		30,000

OUTSTANDING EQUITY AWARDS AT 2009 FISCAL YEAR-END TABLE

		Option Awards
					Equity Incentive
		Number of	Number of		Plan Awards:
		Securities	Securities		Number of
		Underlying	Underlying		Securities
		Unexercised	Unexercised		Underlying	Option
		Options	Options		Unexercised	Exercise		Option
		(#)	(#)		Unearned	Price		Expiration
Name		(Exercisable)	(Unexercisable)		Options (#)	($)		Date

Zach Sivan		5,000,000		-	-		0.02	12/29/2012
CEO	(1)	875,000		875,000	—		0.03	12/14/2015
	(2)	2,031,250		468,750	—		0.03	8/14/2014
	(3)	859,375		390,625	—		0.03	1/16/2015
	(4)	-		7,000,000			0.02	12/30/2013

Gabi Kabazo		3,500,000		-	-		0.02	12/29/2012
CFO	(5)	875,000		875,000	—		0.03	12/14/2015
	(6)	1,836,250		423,750	—		0.03	8/14/2014
	(7)	1,875,000		625,000	—		0.03	11/27/2014
	(8)	-		4,000,000			0.02	12/30/2013

Mordechai Broudo		7,000,000		-	-		0.02	12/29/2012
Chairman	(9)	7,500,000		2,500,000	—		0.03	11/27/2014
	(10)	1,750,000		1,750,000	—		0.03	12/14/2015
	(11)			7,000,000			0.03	12/30/2013

Shay Ben Asulin	(12)	875,000		875,000	—		0.03	12/14/2015
Director		500,000		-	—		0.02	12/29/2012

(1)	Out of the 875,000 unexercisable stock options, 437,500 will vest on December 14, 2010 and 437,500 will vest on December 14, 2011.
(2)	468,750 will vest on August 14, 2010.
(3)	Out of the 390,625 unexercisable stock options, 78,125 will vest on January 16, 2010 and 312,500 will vest on January 16, 2011.
(4)	Out of the 7,000,000 unexercisable stock options, 1,750,000 will vest on December 30, 2010, 1,750,000 will vest on December 30, 2011, 1,750,000 will vest on December 30, 2012 and 1,750,000 will vest on December 30, 2013.
(5)	Out of the 875,000 unexercisable stock options, 437,500 will vest on December 14, 2010 and 437,500 will vest on December 14, 2011.
(6)	423,750 will vest on August 14, 2010.
(7)	625,000 will vest on November 27, 2010.
(8)	Out of the 4,000,000 unexercisable stock options, 1,000,000 will vest on December 30, 2010, 1,000,000 will vest on December 30, 2011, 1,000,000 will vest on on December 30, 2012 and 1,000,000 will vest on December 30, 2013
(9)	2,500,000 will vest on November 27, 2010.
(10)	Out of the 1,750,000 unexercisable stock options, 875,000 will vest on December 14, 2010 and 875,000 will vest on December 14, 2011.
(11)	Out of the 7,000,000 unexercisable stock options, 1,750,000 will vest on December 30, 2010, 1,750,000 will vest on December 30, 2011, 1,750,000 will vest on December 30, 2012 and 1,750,000 will vest on December 30, 2013.
(12)	Out of the 875,000 unexercisable stock options, 437,500 will vest on December 14, 2010 and 437,500 will vest on December 14, 2011.

	Stock Awards
				Equity Incentive
	Number			Plan Awards:		Equity Incentive
	of Shares		Market	Number of		Plan Awards:
	or		Value of Shares	Unearned		Market or Payout
	Units		or Units of	Shares, Units or		Value of
	of Stock		Stock	Other		Unearned
	That		That	Rights		Shares, Units or
	Have		Have	That Have Not		Other Rights That
	Not		Not	Vested		Have
Name	Vested (#)		Vested ($)	(#)($)		Not Vested

Zach Sivan		—	—		—	—
CEO

Gabi Kabazo		—	—		—	—
CFO

Mordechai Broudo		—	—		—	—
Chairman

OPTION GRANTS IN LAST FISCAL YEAR

During the year ended December 31, 2009, options to purchase our shares of common stock were issued to the following officers, directors as well as to certain employees of m-Wise (and its subsidiaries), in the amounts listed next to their names pursuant to the Israel Stock Option Plan (2003) and the International Share Option Plan (2003):

International Share Option Plan (2003):

Mati Broudo – 7,000,000 options

Gabriel Kabazo – 4,000,000 options

Israel Stock Option Plan (2003):

Zach Sivan – 7,000,000 options

Asaf Lewin – 2,000,000 options

Additionally, an aggregate of 440,000 options were issued pursuant to the International Share Option Plan (2003) and 4,000,000 options were issued pursuant to the Israel Stock Option Plan (2003) to other employees.

STOCK OPTION PLANS

We adopted an Israel Stock Option Plan (2003) (the "2003 Israeli Plan") and an International Share Option Plan (2003) (the "2003 International Plan") on January 16, 2003, by resolution of our Board of Directors and stockholders, and an Israel Share Option Plan (2001) and an International Share Option Plan (2001) by resolution of our Board of Directors and stockholders. The Plans enable us to offer an incentive based compensation system to our employees, directors and consultants and employees, directors and consultants of our subsidiaries and/or affiliated companies.

No options were granted in 2002.

During the year ended December 31, 2003, options to purchase our shares of common stock were issued to the following officers, directors and affiliates of m-Wise (and its subsidiaries), as well as to certain employees, former employees and service provider of m-Wise (and its subsidiaries), in the amounts listed next to their names pursuant to the Israel Share Option Plan (2001), Israel Stock Option Plan (2003) and the International Share Option Plan (2003):

Israel Share Option Plan (2001):

Gabriel Kabazo - 150,000 options.

Additionally, an aggregate of 2,250,000 options were issued pursuant to the Israel Share Option Plan (2001) to other employees and former employees.

All options under the Israel Share Option Plan (2001) are exercisable into shares of common stock on a one-for-one basis.

Israel Stock Option Plan (2003):

Inter-Content Development for the Internet Ltd. -7,457,010 options.

Gabriel Kabazo - 402,114 options

Asaf Lewin - 5,336,820 options

Additionally, an aggregate of 2,859,906 options were issued pursuant to the Israel Stock Option Plan (2003) to other employees.

All options under the Israel Stock Option Plan (2003) are exercisable into shares of common stock on a one-for-one basis.

International Share Option Plan (2003):

Proton Marketing Associates, LLC - 10,432,560 options - beneficial owner is Mordechai Broudo, our CEO.

Putchkon.com, LLC - 10,876,080 options - beneficial owner is Shay Ben-Asulin, our Chairman.

Additionally, an aggregate of 3,752,454 options were issued pursuant to the International Share Option Plan(2003) to former employees.

All options under the International Share Option Plan (2003) are exercisable into shares of common stock on a one-for-one basis.

No options were granted in 2004, 2005 or in 2006.

During the year ended December 31, 2007, options to purchase our shares of common stock were issued to the following officers, directors as well as to certain employees of m-Wise (and its subsidiaries), in the amounts listed next to their names pursuant to the Israel Stock Option Plan (2003) and the International Share Option Plan (2003):

International Share Option Plan (2003):

Mati Broudo - 3,500,000 options

Shay Ben-Asulin - 1,750,000 options

Israel Stock Option Plan (2003):

Gabriel Kabazo - 1,750,000 options

Zach Sivan - 3,000,000 options

Additionally, an aggregate of 500,000 options were issued pursuant to the International Share Option Plan (2003) and 2,860,000 options were issued pursuant to the Israel Stock Option Plan (2003) to other employees.

During the year ended December 31, 2008, options to purchase our shares of common stock were issued to the following officers, directors as well as to certain employees of m-Wise (and its subsidiaries), in the amounts listed next to their names pursuant to the Israel Stock Option Plan (2003) and the International Share Option Plan (2003):

International Share Option Plan (2003):

Mati Broudo – 7,000,000 options

Shay Ben-Asulin – 500,000 options

Israel Stock Option Plan (2003):

Gabriel Kabazo – 3,500,000 options

Zach Sivan – 5,000,000 options

Additionally, an aggregate of 900,000 options were issued pursuant to the International Share Option Plan (2003) and 3,500,000 options were issued pursuant to the Israel Stock Option Plan (2003) to other employees.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

PRINCIPAL STOCKHOLDERS AND HOLDINGS OF MANAGEMENT

The following table sets forth certain information, as of the date hereof, with respect to the beneficial ownership of the common stock by each beneficial owner of more than 5% of the outstanding shares thereof, by each director, each nominee to become a director and each executive named in the Summary Compensation Table and by all executive officers, directors and nominees to become directors of m-Wise. As of the date hereof, we had 147,392,452 shares of our common stock outstanding. Pursuant to the rules and regulations of the Securities and Exchange Commission, shares of common stock that an individual or group has a right to acquire within 60 days pursuant to the exercise of options or warrants are deemed to be outstanding for the purposes of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purposes of computing the percentage ownership of any other person shown in the table.

NAME AND ADDRESS	SHARES OWNED		PERCENTAGE
Shay Ben-Asulin(1)		16,712,394		10.6	%
Mordechai Broudo(2)		41,084,580		18.2
Miretzky Holdings Ltd.(3)		32,423,392		18.8
Gabriel Kabazo (4)		14,556,678		5.5
Asaf Lewin(5)		7,055,017		3.4
Inter-content Development for the Internet Ltd. (6)		8,513,841		5.8
Zach Sivan(7)		19,827,514		7.1
All officers and directors as a group (5 persons) (1)(2)(4)(5)(7)		99,236,183		38.7	%

(1) Includes an aggregate of 2,250,000 options to purchase shares of common stock, granted to Shay Ben-Asulin. Shay Ben-Asulin is the beneficial owner of Putchkon.com, LLC, which owns part of these shares. The address of Putchkon.com, LLC is c/o Doron Cohen -David Cohen, Law Offices, 14 Abba Hillel Silver Rd. Ramat-Gan, Israel 52506.

(2) Includes an aggregate of 27,500,000 options to purchase shares of common stock, granted to Mordechai Broudo. Mordechai Broudo is the beneficial owner of Proton Marketing Associates, LLC, which owns part of these shares. The address of Proton Marketing Associates, LLC is c/o Doron Cohen - David Cohen, Law Offices, 14 Abba Hillel Silver Rd. Ramat-Gan, Israel 52506.

(3) The beneficial owner of Miretzky Holdings Ltd. is Mark Quirk. The address for Miretzky Holdings, Ltd. is Clinch's House, Lord Street, Douglas, Isle of Man, IM99 1RZ (PO Box 227).

(4) Includes an aggregate of 14,010,000 options to purchase shares of common stock, granted to Gabriel Kabazo. The address of Gabriel Kabazo is c/o m-Wise.

(5) Includes an aggregate of 2,000,000 options to purchase shares of common stock, granted to Asaf Lewin. The address of Asaf Lewin is c/o m-Wise.

(6) The address of Inter-Content Development for the Internet Ltd. is 18 Yohanan Ha'Sandlar St., Tel Aviv, Israel 63822. The beneficial owner of Inter-Content Development for the Internet is Mr. Jacob Marinka.

(7) Includes an aggregate of 17,500,000 options to purchase shares of common stock, granted to Zach Sivan. The address of Zach Sivan is c/o m-Wise.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

RESEARCH AND DEVELOPMENT SERVICES AGREEMENTS, LICENSE AGREEMENTS AND

LOAN GREEMENT.

We have entered into a License Agreement with each of our United Kingdom, France, Spain, Italy and Israeli subsidiaries, and into Research and Development Services Agreements with our Israeli subsidiary, m-Wise Ltd. The License Agreements provide for the grant of a non-exclusive, irrevocable adnoun-transferable license to each of the said subsidiaries to use, sublicense, sell, market and distribute our technology and platform, for no consideration. As part of our corporate and sales channel's reorganization process, these agreements were terminated by us as of April 1, 2003. The Research and Development Services Agreements with our Israeli subsidiary provide for the performance of research and development services of the components to be included in our technology and platform, by our Israeli subsidiary. During 2000, in consideration for the services, we paid our Israeli subsidiary service fees in an amount equal to the sum of all costs of the subsidiary, plus a fee equal to 5% of such costs (a "cost plus" basis), or $473,883. As of 2001, we paid our Israeli subsidiary service fees on a "cost" basis, however the parties may change the consideration from time to time, and when we become profitable, the consideration shall be on a "cost plus" basis, or another structure agreed by the parties. The Research and Development Services and License agreements provide for the sole ownership by us of our technology, platform, derivative invention and intellectual property. The amounts paid in during the years ended December 31, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008 and 2009 to our Israeli subsidiary were $1,522,000, $1,760,000, $665,000, $683,964, $1,161,113, 1,085,824, $1,528,781, $1,689,278 and $596,336, respectively.

Promissory Note dated July 10, 2002 (canceling and replacing certain Promissory Notes dated March 13, 2002) with each of Syntek Capital AG and DEP Technology Holdings Ltd. (“DEP”). During 2002, Syntek Capital and DEP, then the only holders of shares of our Series B preferred stock (which has subsequently been converted into shares of our common stock) and represented on our Board of Directors, extended to us a loan in the aggregate amount of $1,800,000. Pursuant to the Promissory Notes, we are required to repay the loan amount, together with accrued interest from the date of the Promissory Notes and until the date of repayment, during the period of January 1, 2003 through December 31, 2007. The interest rate is determined according to the per annum LIBOR rate offered by Citibank North America as of the date of the Promissory Notes, and thereafter such LIBOR rate offered on each anniversary of the date of the Promissory Notes, to apply for the following 12 month period. The repayment of the loan amount, together with the accrued interest thereon, is to be made exclusively from our annual revenues generated during the repayment period, as recorded in our audited annual financial statements in such way that each of the Syntek Capital and DEP Technology Holdings shall be entitled to receive 2.5% of the revenues on account of the repayment of the loan amount until the earlier to occur of: (i) each of Syntek Capital and DEP Technology Holdings has been repaid the entire loan amounts; or (ii) any event in which the loan amount becomes due and payable, as described below. Actual payments are on a quarterly basis, within 45 days following the last day of the quarter, based upon the quarterly financial reports. The entire unpaid portion of the loan amount shall be automatically and immediately due and payable upon the earlier to occur of (i) December 31, 2007; (ii) the closing of an exit transaction; or (iii) an event of default. An "exit transaction" includes, INTER ALIA: (a) the acquisition of m-Wise by means of merger, acquisition or other form of corporate reorganization in which our stockholders prior to such transaction hold less than 50% of the share capital of the surviving entity, (b) sale of all or substantially all of our assets or any other transaction resulting in our assets being converted into securities of any other entity, (c) the acquisition of all or substantially all of our issued shares, (d) the sale or exclusive license of our intellectual property other than in the ordinary course of business; or (e) a public offering of our securities. An "event of default" includes, INTER ALIA: (a) our breach of any of our material obligations under the Promissory Notes (including any default on any payment due under the Promissory Notes) which has not been remedied within 20 days of written notice by Syntek Capital and DEP Technology Holdings (b) the suspension of the transaction of our usual business or our insolvency, (c) the commencement by us of any voluntary proceedings under any bankruptcy reorganization, arrangement, insolvency, readjustment of debt, receivership, dissolution or liquidation law or statute of a jurisdiction, or if we shall be adjudicated insolvent or bankrupt by a decree of a court of competent jurisdiction; if we shall petition or apply for, acquiesce in, or consent to, the appointment of any receiver or trustee of us or for all or any part of our property or if we apply for an arrangement with our creditors or participants; or if we shall make an assignment of our intellectual property for the benefit of our creditors (other than in the ordinary course of business), or if we shall admit in writing our inability to pay our debts as they mature or if any of our intellectual property is purchased by or assigned to any one of our founders (and/or affiliates thereof) under liquidation proceedings without the prior written consent of Syntek Capital and DEP Technology Holdings, (d) or if there shall be commenced against us any proceedings related to us under any bankruptcy, reorganization, arrangement, insolvency, readjustment of debt, receivership, dissolution or liquidation law or statute of any jurisdiction, and any such proceedings shall remain undismissed for a period of thirty (30) days, or if by any act we indicate our consent to, approval of or acquiescence in, any such proceeding; or if a receiver or trustee shall be appointed for us or for all or a substantial part of our property, and any such receivership or trusteeship shall remain undischarged for a period of thirty (30) days; or (e if there shall have been a material deterioration of our business, financial condition or operations. Under the Promissory Notes, we undertook that until the repayment of the loan amount: (i) we shall not create or suffer to create a pledge, charge or other encumbrance over any or all of our assets except for such pledge, charge or encumbrance in favor of a bank under the terms of a loan or line of credit granted by a bank to us, provided that we gave prior notice to Syntek Capital and DEP Technology Holdings with respect such pledge, charge or encumbrance at least ten (10) days prior to its creation; (ii) we shall not engage or permit any of our subsidiaries to engage in any business other than the business engaged in by us at the date of the Promissory Notes and any business substantially similar or related thereto (or incidental thereto); (iii) we shall not declare or pay a dividend or make any distribution or payment on account of our shares, except for the purpose of purchasing common stock of m-Wise held by Ogen LLC as applicable under a certain undertaking of the principals of Ogen LLC towards m-Wise; (iv) we shall deliver to Syntek Capital and DEP Technology Holdings audited financial statements within 90 days of the end of our fiscal year, accompanied by the report of a firm of independent certified public accountants of recognized standing and unaudited quarterly financial statements signed by our Chief Financial Officer within 30 (thirty) days of the end of each quarter and we shall also deliver to Syntek Capital and DEP Technology Holdings any information which we make generally available to our stockholders or which Syntek Capital and DEP Technology Holdings may otherwise reasonably require. As of December 31, 2005, we had to pay $199,000 of the loan amount, based on 5.0% of our revenues subsequent to January 1, 2003. As of the date hereof, we have not paid any amount due to the lenders. Neither Syntek nor DEP Technology is represented on our current Board of Directors and neither is affiliated with any of our officers, directors or principal stockholders. As of December 31, 2005, the outstanding balance of the loan was $1,959,034.

On December 22, 2005, we entered into a Termination and Release Agreement with Syntek capital AG, Syntek agreed to accept shares of common stock and warrants in exchange for the cancellation of the Promissory Note and an extinguishments of all other obligations other than as set forth in the Agreement, which had a balance of $967,787 as of December 22, 2005. We issued Syntek an aggregate of 5,561,994 shares of our common stock and warrants to purchase 5,263,158 shares of our Common stock at $.19 per shares for a period of three years. The 5,561,994 shares were calculated based on a share price of $.17 per share, which was the weighted average closing price for the 30 trading days prior to December 22, 2005. The Agreement further provides that in the event that we do not consummate an acquisition with a targeted company in the business of developing network platforms for corporations, cellular carriers and wireless application service providers prior to February 28, 2006, we will be obligated to issue Syntek an additional 638,230 shares of common stock. As the acquisition did not take place, we issued Syntek additional 638,230 shares of common stock.

On February 2, 2006, we entered into a Termination and Release Agreement with DEP Technology Holdings Ltd., Pursuant to the Agreement, DEP agreed to accept shares of common stock and warrants in exchange for the cancellation of the Note and an extinguishments of all other obligations other than as set forth in the Agreement, which had a balance of $967,787 as of December 22, 2005. We issued DEP an aggregate of 5,561,994 shares of our common stock and warrants to purchase 5,263,158 shares of our Common stock at $.19 per shares for a period of three years. The 5,561,994 shares were calculated based on a share price of $.174 per share, which was the weighted average closing price for the 30 trading days prior to December 22, 2005. The Agreement further provides that in the event that we do not consummate an acquisition with a targeted company in the business of developing network platforms for corporations, cellular carriers and wireless application service providers prior to February 28, 2006, we will be obligated to issue DEP an additional 638,230 shares of common stock. As the acquisition did not take place, we issued DEP additional 638,230 shares of common stock.

AGREEMENT, SECURITY AGREEMENT, ESCROW AGREEMENT AND UNDERTAKING. In July 2002, Proton Marketing Associates, LLC, Putchkon.com, LLC (each a founding stockholder of m-Wise and represented on our Board of Directors) and Inter-Content Development for the Internet Ltd. (the "Buying stockholders") purchased all of our Series B preferred stock (all of which has been converted into shares of our common stock) then held by DEP Technology Holdings Ltd. And Syntek Capital AG, thus becoming the sole holders of our Series B preferred stock (all of which has been converted into shares of our common stock), except for options granted to purchase Series B preferred stock (prior to the conversion thereof to shares of our common stock). In consideration for the stock purchased, each of the Buying stockholders is required to pay each of DEP Technology Holdings and Syntek Capital, upon the consummation of any "liquidation event" (as described below), an amount equal to 50% (to be reduced by 5 percentage points at the end of each 6 months commencing as of July 1, 2002, provided that from and after June 30, 2005, such percentage shall equal 20%) of any gross distribution to or any gross proceeds received by the Buying stockholders by reason of their ownership of, or rights in, any of our shares or options to purchase our shares, whether such shares are held by the Buying stockholders directly, indirectly, or by an affiliate (the "Founders securities"). The consideration will be paid upon the consummation of a liquidation event which is defined as the: (i) sale, transfer, conveyance, pledge or other disposal by the Buying stockholders or any affiliate thereof of any of their Founders securities; (ii) any event in which the Buying stockholders or any affiliate thereof receive stock (in kind or cash dividends) from us or any surviving corporation following the consummation of a merger and acquisition transaction (any transaction in which we shall merge into or consolidate with any other corporation in which we are not the surviving entity); or (iii) the initial public offering of our securities. In the event of an initial public offering of our securities, the consideration shall be paid in Founders securities and shall equal 50% (as adjusted) of the securities held by the Buying stockholders prior to the public offering. Until payment of the consideration as aforesaid, the purchased Series B preferred stock (all of which has been converted into shares of our common stock) and any securities as shall be issued and/or granted to either of the Buying stockholders during the terms of the Agreement (the "Secured collateral"), are subject to a certain first priority interest granted in favor of each of DEP Technology Holdings and Syntek Capital (and subject to adjustment as aforesaid) pursuant to a Security Agreement signed between the parties, and are placed in escrow pursuant to a certain Escrow Agreement until the occurrence of a liquidation event, such as the sale, transfer, conveyance, pledge or other disposal by the Buying stockholders of any of their securities in m-Wise or the consummation of an initial public offering of our securities. Under the Security Agreement, the Buying stockholders undertook, INTER ALIA, not to encumber or pledge or to suffer any such encumbrance, pledge, attachment or other third party rights on any of the Secured collateral. In an event of default in any transfer of the consideration pursuant to the Agreement, DEP Technology Holdings and Syntek Capitals shall have all rights of a secured creditor subject to the terms of the Agreement and may immediately take ownership of any part of the Secured collateral and sell, assign or transfer any part of the Secured collateral. Under a Letter of Consent, Approval and Undertaking, each beneficial owner of Proton Marketing Associates, Putchkon.com and Inter-Content Development for the Internet undertook towards DEP Technology Holdings and Syntek Capital, INTER ALIA, not to transfer any securities and that such transfer shall be null and void unless approved in writing by DEP Technology Holdings and Syntek Capital. Pursuant to a certain Termination and Release Agreement dated as of December 22, 2005, by and among Shay Ben Asulin, Mati Broudo, Kobi Morenko, Proton Marketing LLC, Putchkon.Com LLC and Inter-Content Development for the Internet Ltd. (collectively, the "Founders") and Syntek capital AG. Syntek agreed to exchanged certain of its rights for 5,744,074 shares in the Company held by the Founders..

As of December 31, 2008, all the 5,744,074 shares were transferred from the Founders to Syntek Capital AG.

Pursuant to a certain Termination and Release Agreement dated as of February 2, 2006, by and among Shay Ben Asulin, Mati Broudo, Kobi Morenko, Proton Marketing LLC, Putchkon.Com LLC and Inter-Content Development for the Internet Ltd. (collectively, the "Founders") and DEP Technology Holdings Ltd..DEP agreed to exchange certain of its rights for 5,744,074 shares in the Company held by the Founders. All the 5,744,074 shares were transferred from the founders to DEP Technology Holdings Ltd.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The following fees were paid to SF Partnership LLP for services rendered in 2009 and 2008

	2009		2008

(1) Audit Fees	$	26,350	$	44,738

(2) Audit Related Fees		—		—

(3) Tax Fees		—		—

(4) All Other Fees		—		—

Audit fees are comprised of the fees charged in conjunction with the audit of the Company's annual financial statements, review of the Company's annual reports filed with the Securities and Exchange Commission on Form 10-K/, and review of the information contained in the Company's quarterly filings with the Securities and Exchange Commission on Form 10-Q.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

Exhibit
Number		Description

3.1		Amended and Restated Certificate of Incorporation(2)
3.2		Bylaws(2)
4.1		Purchase and registration rights agreement and schedule of details(2)
10.1		Amended and Restated Employment Agreement with Mordechai Broudo(2)
10.2		Amendment to Amended and Restated Employment Agreement with Mordechai Broudo(2)
10.3		Amended and Restated Employment Agreement with Shay Ben-Asulin(2)
10.4		Amendment to Amended and Restated Employment Agreement with Shay Ben-Asulin(2)
10.5		Employment Agreement, Gabriel Kabazo(2)
10.6		Confidentiality Rider to Gabriel Kabazo Employment Agreement(2)

10.7	Employment Agreement Asaf Lewin(2)
10.8	2003 International Share Option Plan(2)
10.9	Form of Option Agreement, 2003 International Share Option Plan(2)
10.10	2001 International Share Option Plan(2)
10.11	Form of Option Agreement, 2001 International Share Option Plan(2)
10.12	2003 Israel Stock Option Plan(2)
10.13	Form of Option Agreement, 2003 Israel Stock Option Plan(2)
10.14	2001 Israel Share Option Plan(2)
10.15	Form of Option Agreement, 2001 Israel Share Option Plan(2)
10.16	Investors' Rights Agreement dated January 11, 2001(2)
10.17	Stockholders Agreement(2)
10.18	Agreement for Supply of Software and Related Services dated October 14, 2002, by and between i Touch plc and m-Wise, Inc. (2)
10.19	Purchase Agreement between m-Wise, Inc. and Comtrend Corporation dated May 22, 2002(2)
10.20	Amended and Restated Consulting agreement between Hilltek Investments Limited and m-Wise dated November 13, 2003(2)
10.21	Consulting Agreement between Hilltek Investments Limited and m-Wise dated June 24, 2003, subsequently amended (see Exhibit 10.20 above) (2)
10.22	Amendment to Investors' Rights Agreement dated October 2, 2003(2)
10.23	Appendices to 2003 Israel Stock Option Plan(2)
10.24	Appendices to 2001 Israel Share Option Plan(2)
10.25	Credit Line Agreement between m-Wise, Inc. and Miretzky Holdings, Limited dated January 25, 2004(2)
10.26	Termination and Release Agreement by and among the Company and Syntek capital AG.(3)
10.27	Termination and Release Agreement dated February 2, 2006, by and among the Company and DEP Technology Holdings Ltd. (4)

14	Code of Ethics (5)
21.1	List of Subsidiaries (1)
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)

(1) Filed herewith.

(2) Incorporated by reference from the registration statement filed with the Securities and Exchange Commission Registration Statement on Form SB-2, as amended (Reg. No. 333-106160).

(3) Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on January 13, 2006.

(4) Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on February 7, 2006.

(5) Incorporated by reference to Exhibit 14 of the Annual Report on Form 10-KSB filed on April 14, 2005.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	m-Wise, INC.

Date: March 12, 2010	By:	/s/ Mordechai Broudo
		Mordechai Broudo Chairman

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

March 12, 2010	By:	/s/ Mordechai Broudo
		Mordechai Broudo
		Chairman

March 12, 2010	By:	/s/ Gabriel Kabazo
		Gabriel Kabazo
		Chief Financial Officer (principal financial officer and principal accounting officer)

March 12, 2010	By:	/s/ Zach Sivan
		Zach Sivan
		Chief Executive Officer

March 12, 2010	By:	/s/ Shay Ben Asulin
		Shay Ben Asulin
		Director

EXHIBIT INDEX

Exhibit
Number		Description

3.1		Amended and Restated Certificate of Incorporation(2)
3.2		Bylaws(2)
4.1		Purchase and registration rights agreement and schedule of details(2)
10.1		Amended and Restated Employment Agreement with Mordechai Broudo(2)
10.2		Amendment to Amended and Restated Employment Agreement with Mordechai Broudo(2)
10.3		Amended and Restated Employment Agreement with Shay Ben-Asulin(2)
10.4		Amendment to Amended and Restated Employment Agreement with Shay Ben-Asulin(2)
10.5		Employment Agreement, Gabriel Kabazo(2)
10.6		Confidentiality Rider to Gabriel Kabazo Employment Agreement(2)
10.7		Employment Agreement Asaf Lewin(2)
10.8		2003 International Share Option Plan(2)
10.9		Form of Option Agreement, 2003 International Share Option Plan(2)
10.10		2001 International Share Option Plan(2)
10.11		Form of Option Agreement, 2001 International Share Option Plan(2)
10.12		2003 Israel Stock Option Plan(2)
10.13		Form of Option Agreement, 2003 Israel Stock Option Plan(2)
10.14		2001 Israel Share Option Plan(2)
10.15		Form of Option Agreement, 2001 Israel Share Option Plan(2)
10.16		Investors' Rights Agreement dated January 11, 2001(2)
10.17		Stockholders Agreement(2)
10.18		Agreement for Supply of Software and Related Services dated October 14, 2002, by and between i Touch plc and m-Wise, Inc. (2)
10.19		Purchase Agreement between m-Wise, Inc. and Comtrend Corporation dated May 22, 2002(2)
10.20		Amended and Restated Consulting agreement between Hilltek Investments Limited and m-Wise dated November 13, 2003(2)
10.21		Consulting Agreement between Hilltek Investments Limited and m-Wise dated June 24, 2003, subsequently amended (see Exhibit 10.20 above) (2)
10.22		Amendment to Investors' Rights Agreement dated October 2, 2003(2)
10.23		Appendices to 2003 Israel Stock Option Plan(2)
10.24		Appendices to 2001 Israel Share Option Plan(2)
10.25		Credit Line Agreement between m-Wise, Inc. and Miretzky Holdings, Limited dated January 25, 2004(2)

10.26	Termination and Release Agreement by and among the Company and Syntek capital AG.(3)
10.27	Termination and Release Agreement dated February 2, 2006, by and among the Company and DEP Technology Holdings Ltd. (4)

14	Code of Ethics (5)
21.1	List of Subsidiaries (1)
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (1)
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (1)

(1) Filed herewith.

(2) Incorporated by reference from the registration statement filed with the Securities and Exchange Commission Registration Statement on Form SB-2, as amended (Reg. No. 333-106160).

(3) Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on January 13, 2006.

(4) Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on February 7, 2006.

(5) Incorporated by reference to Exhibit 14 of the Annual Report on Form 10-KSB filed on April 14, 2005.

Attached files

M WISE INC Reports

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