UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION




WASHINGTON,
D.C. 20549




FORM
10-Q




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




For the
quarterly period ended March 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:  001-51743




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)




+972-73-2620000


(Registrant’s
telephone number, including area code)




All
Correspondence to:


Arthur S.
Marcus, Esq.


Gersten
Savage LLP


600
Lexington Avenue, 9th
Floor


New York,
New York 10022


(212)
752-9700





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 x No  ̈




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  ̈ No  ̈





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  ̈
            Accelerated
      filer  ̈Non-accelerated
      filer   ̈ (Do not check if
      a smaller reporting company)
            Smaller
      reporting company x





Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).


Yes  ̈ No x







The
number of shares outstanding of the issuer's common stock, as of May 14, 2009,
was 139,322,145.







Index




PagePART
      I: FINANCIAL INFORMATION
                                            
                                            
                                            2Item
      1:
                                            Financial
      Statements
                                            
                                            
                                            F-1Item
      2.
                                            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                                            
                                            
                                            3Item
      3.
                                            Quantitative
      and Qualitative Disclosures about Market Risk
                                            
                                            
                                            10Item
      4T.
                                            Controls
      and Procedures
                                            
                                            
                                            10PART
      II:  OTHER INFORMATION
                                            
                                            
                                            11Item
      1.
                                            Legal
      Proceedings
                                            
                                            
                                            11Item
      1A.
                                            Risk
      Factors
                                            
                                            
                                            11Item
      2.
                                            Unregistered
      Sales of Equity Securities and Use of Proceeds
                                            
                                            
                                            11Item
      3.
                                            Defaults
      upon Senior Securities
                                            
                                            
                                            11Item
      4.
                                            Submission
      of Matters to a Vote of Security Holders
                                            
                                            
                                            11Item
      5.
                                            Other
      Information
                                            
                                            
                                            11Item
      6.
                                            Exhibits
                                            
                                            
                                            11SIGNATURES
                                            
                                            
                                            14


i




PART
I:


FINANCIAL
INFORMATION




Item
1:     Financial Statements





M-WISE,
INC. AND SUBSIDIARY




CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS




THREE
MONTHS ENDED  MARCH 31, 2009 AND 2008




UNAUDITED




CONTENTS




Condensed
      Consolidated Balance Sheets
                
                
                F-1Condensed
      Consolidated Statements of Operations and Comprehensive Earnings
      (Loss)
                
                
                F-2Condensed
      Consolidated Statements of Cash Flows
                
                
                F-3Notes
      to Condensed Consolidated Financial Statements
                
                
                F-4
      - F-16


2




M-WISE,
INC. AND SUBSIDIARY


Condensed
Consolidated Balance Sheets


As of
March 31, 2009 and December 31, 2008





March
      31,
                                          
                                          
                                          December
      31,2009
                                          
                                          
                                          2008(Unaudited)
                                          
                                          
                                          (Audited)ASSETSCurrentCash
                                          
                                          $
                                          282,018
                                          
                                          
                                          $
                                          169,206Short-term
      investment
                                          
                                          
                                          7,769
                                          
                                          
                                          
                                          7,769Accounts
      receivable – trade (net of allowance for doubtful accounts of $337,940;
      2008 - $337,940)
                                          
                                          
                                          624,288
                                          
                                          
                                          
                                          606,610Prepaid
      and other assets
                                          
                                          
                                          25,604
                                          
                                          
                                          
                                          35,591Total
      Current Assets
                                          
                                          
                                          939,679
                                          
                                          
                                          
                                          819,176Long-term
      Prepaid Expenses
                                          
                                          
                                          15,056
                                          
                                          
                                          
                                          13,523Plant and Equipment, net(note
      3)
                                          
                                          
                                          56,480
                                          
                                          
                                          
                                          62,927Total
      Long-term Assets
                                          
                                          
                                          71,536
                                          
                                          
                                          
                                          76,450Total
      Assets
                                          
                                          $
                                          1,011,215
                                          
                                          
                                          $
                                          895,626LIABILITIESCurrentAccounts
      payable – trade
                                          
                                          $
                                          13,162
                                          
                                          
                                          $
                                          27,144Other
      payables and accrued expenses
                                          
                                          
                                          1,101,376
                                          
                                          
                                          
                                          1,177,780Advances
      from stockholder (note 4)
                                          
                                          
                                          299,484
                                          
                                          
                                          
                                          305,876Billings
      in excess of costs on uncompleted contracts
                                          
                                          
                                          3,680
                                          
                                          
                                          
                                          3,680Total
      Current Liabilities
                                          
                                          
                                          1,417,702
                                          
                                          
                                          
                                          1,514,480Accrued Severance Pay(note
      5)
                                          
                                          
                                          102,406
                                          
                                          
                                          
                                          114,631Total
      Liabilities
                                          
                                          
                                          1,520,108
                                          
                                          
                                          
                                          1,629,111Commitments
      and Contingencies (note 11)STOCKHOLDERS'
      DEFICITCapital Stock(note 6)
                                          
                                          
                                          236,848
                                          
                                          
                                          
                                          236,848Additional
      Paid-in Capital
                                          
                                          
                                          11,680,480
                                          
                                          
                                          
                                          11,626,126Accumulated
      Other Comprehensive Income
                                          
                                          
                                          18,170
                                          
                                          
                                          
                                          -Accumulated
      Deficit
                                          
                                          
                                          (12,444,391
                                          )
                                          
                                          
                                          (12,596,459
                                          )Total Stockholders' Deficit
                                          
                                          
                                          (508,893
                                          )
                                          
                                          
                                          (733,485
                                          )Total
      Liabilities and Stockholders' Deficit
                                          
                                          $
                                          1,011,215
                                          
                                          
                                          $
                                          895,626





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


F-1




M-WISE,
INC. AND SUBSIDIARY


Condensed
Consolidated Statements of Operations and Comprehensive Earnings
(Loss)


For the
Three Months Ended March 31, 2009 and 2008


Unaudited





Three
      Months
                                                          
                                                          
                                                          Three
      MonthsEnded
                                                          
                                                          
                                                          EndedMarch
      31,
                                                          
                                                          
                                                          March
      31,2009
                                                          
                                                          
                                                          2008SalesCustomer
      services and technical support
                                                          
                                                          $
                                                          363,538
                                                          
                                                          
                                                          $
                                                          310,260Revenue
      share
                                                          
                                                          
                                                          329,242
                                                          
                                                          
                                                          
                                                          204,798Product
      sales and license
                                                          
                                                          
                                                          99,999
                                                          
                                                          
                                                          
                                                          167,519792,779
                                                          
                                                          
                                                          
                                                          682,577Cost
      of Sales
                                                          
                                                          
                                                          178,365
                                                          
                                                          
                                                          
                                                          232,776Gross
      Profit
                                                          
                                                          
                                                          614,414
                                                          
                                                          
                                                          
                                                          449,801ExpensesGeneral
      and administrative
                                                          
                                                          
                                                          335,052
                                                          
                                                          
                                                          
                                                          431,382Research
      and development
                                                          
                                                          
                                                          139,119
                                                          
                                                          
                                                          
                                                          205,226Total
      Expenses
                                                          
                                                          
                                                          474,171
                                                          
                                                          
                                                          
                                                          636,608Earnings
      (Loss) from Operations
                                                          
                                                          
                                                          140,243
                                                          
                                                          
                                                          
                                                          (186,807
                                                          )Other
      Income (Expenses)Interest
      and other
                                                          
                                                          
                                                          11,825
                                                          
                                                          
                                                          
                                                          (23,085
                                                          )Earnings
      (Loss) before Income Taxes
                                                          
                                                          
                                                          152,068
                                                          
                                                          
                                                          
                                                          (209,892
                                                          )Provision for
      Income Taxes(note 7)
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          -Net
      Earnings (Loss)
                                                          
                                                          
                                                          152,068
                                                          
                                                          
                                                          
                                                          (209,892
                                                          )Foreign
      currency translation adjustment
                                                          
                                                          
                                                          18,170
                                                          
                                                          
                                                          
                                                          -Comprehensive
      Earnings (Loss)
                                                          
                                                          $
                                                          170,238
                                                          
                                                          
                                                          $
                                                          (209,892
                                                          )Earnings
      (Loss) Per Share - Basic and Diluted
                                                          
                                                          $
                                                          0.00
                                                          
                                                          
                                                          $
                                                          0.00Weighted
      Average Number of Common Shares Outstanding
      - Basic and Diluted
                                                          
                                                          
                                                          139,322,145
                                                          
                                                          
                                                          
                                                          139,182,145




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


F-2




M-WISE,
INC. AND SUBSIDIARY


Condensed
Consolidated Statements of Cash Flows


For the
Three Months Ended March 31, 2009 and 2008


Unaudited





Three
      Months
                                              
                                              
                                              Three
      MonthsEnded
                                              
                                              
                                              EndedMarch
      31,
                                              
                                              
                                              March
      31,2009
                                              
                                              
                                              2008Cash
      Flows from Operating ActivitiesNet
      earnings (loss)
                                              
                                              $
                                              152,068
                                              
                                              
                                              $
                                              (209,892
                                              )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Depreciation
                                              
                                              
                                              8,216
                                              
                                              
                                              
                                              11,547Employee
      options vested
                                              
                                              
                                              54,354
                                              
                                              
                                              
                                              86,269214,638
                                              
                                              
                                              
                                              (112,076
                                              )Net
      changes in assets and liabilities:Accounts
      receivable - trade
                                              
                                              
                                              (17,678
                                              )
                                              
                                              
                                              (47,060
                                              )Prepaid
      and other assets
                                              
                                              
                                              9,987
                                              
                                              
                                              
                                              1,861Accounts
      payable - trade
                                              
                                              
                                              (13,982
                                              )
                                              
                                              
                                              (6,115
                                              )Other
      payables and accrued expenses
                                              
                                              
                                              (58,234
                                              )
                                              
                                              
                                              (78,673
                                              )Billings
      in excess of costs on uncompleted contracts
                                              
                                              
                                              -
                                              
                                              
                                              
                                              (30,760
                                              )Long
      term prepaid expenses
                                              
                                              
                                              (1,533
                                              )
                                              
                                              
                                              1,366Accrued
      severance pay
                                              
                                              
                                              (12,225
                                              )
                                              
                                              
                                              11,967Net
      Cash Provided by (Used in) Operating Activities
                                              
                                              
                                              120,973
                                              
                                              
                                              
                                              (259,480
                                              )Cash
      Flows from Investing ActivitiesAcquisition
      of plant and equipment
                                              
                                              
                                              (1,769
                                              )
                                              
                                              
                                              (3,346
                                              )Net
      Cash Used in Investing Activities
                                              
                                              
                                              (1,769
                                              )
                                              
                                              
                                              (3,346
                                              )Cash
      Flows from Financing ActivitiesPayments
      to stockholder
                                              
                                              
                                              (6,392
                                              )
                                              
                                              
                                              -Advances
      from stockholder
                                              
                                              
                                              -
                                              
                                              
                                              
                                              654Bank
      indebtedness
                                              
                                              
                                              -
                                              
                                              
                                              
                                              5,204Net
      Cash (Used in) Provided by Financing Activities
                                              
                                              
                                              (6,392
                                              )
                                              
                                              
                                              5,858Net
      Increase (Decrease) in Cash
                                              
                                              
                                              112,812
                                              
                                              
                                              
                                              (256,968
                                              )Cash
      - Beginning of Period
                                              
                                              
                                              169,206
                                              
                                              
                                              
                                              365,513Cash
      - End of Period
                                              
                                              $
                                              282,018
                                              
                                              
                                              $
                                              108,545Interest
      and Income Taxes PaidDuring
      the period, the Company had cash flows arising from income taxes and
      interests paid as follows:Interest
                                              
                                              $
                                              24
                                              
                                              
                                              $
                                              -Income
      taxes
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -





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


F-3




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




1.
            Description
      of Business and Going Concern




a)
              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.




b)
              Going
      Concern




The
Company's unaudited 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 cash
flows from operations with negative working capital that raise substantial doubt
as to its ability to continue as a going concern. For the three months ended
March 31, 2009, and 2008, the Company experienced working capital deficit of
$478,023 (2008 - $508,072).




The
Company's ability to continue as a going concern is also contingent upon its
ability to secure additional financing, continuing sale of its products and
attaining profitable operations.




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
unaudited 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.


F-4




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




2.
            Summary
      of Significant Accounting Policies




a)
              Basis
      of Presentation




The
unaudited consolidated financial statements presented herein have been prepared
by the Company in accordance with U.S. generally accepted accounting principles
for interim financial statements and in accordance with the instructions to Form
10-Q.  Accordingly, they do not include all information and notes
required by U.S. generally accepted accounting principles for complete financial
statements. The unaudited consolidated financial statements reflect all
adjustments, consisting of normal recurring adjustments and accruals which, in
the opinion of management, are considered necessary for a fair presentation of
the Company's consolidated financial position, results of operations and cash
flows for the interim periods presented.




Results
of operations for the interim periods are not necessarily indicative of results
of operations for future interim periods or for the full fiscal year ending
December 31, 2009. The accompanying unaudited consolidated financial statements
should be read in conjunction with the audited financial statements of the
Company for the fiscal year ended December 31, 2008.




b)
              Recently
      Adopted Accounting Standards




In
September 2006, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 157, "Fair Value Measurements," ("SFAS 157"). SFAS 157 defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
SFAS 157 applies to other accounting pronouncements that require or permit fair
value measurements and does not require any new fair value measurements. In
February 2008, the FASB issued FSP No. 157-1," Application of FASB Statement No.
157 to FASB Statement No.13 and Other Accounting Pronouncements That Address
Fair Value Measurements for Purposes of Lease Classification or Measurement
under Statement 13," ("FSP 157-1") and FSP No. 157-2, "Effective Date of FASB
Statement No. 157," ("FSP 157-2"), as amendments to SFAS No.157. FSP 157-1 and
FSP 157-2 exclude lease transactions from the scope of SFAS No. 157 and also
defer the effective date of the adoption of SFAS 157 for certain non-financial
assets and non-financial liabilities. In October of 2008, the FASB issued FSP
No. 157-3, "Determining the Fair Value of Financial Assets When the Market for
That Asset is Not Active." ("FSP 15-3") as an amendment to SFAS No. 157,
clarifying the application of SFAS No. 157 in a non-active market. The Company
adopted FSP 157-1 in 2008 and FSP 157-2 and FSP 157-3 in the first quarter 2009
and they did not have a material impact on the Company's consolidated financial
statements, other than additional disclosure. See Note 13 for further
discussion.


F-5




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




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




c)
              Impact
      of Recently Issued Accounting Standards
(cont'd)




In April
2009, the FASB issued the following new accounting standards:




i) FASB
Staff Position FAS 157-4, "Determining Fair Value When the Volume and Level of
Activity for the Asset or Liability Have Significantly Decreased and Identifying
Transactions that are not Orderly", or FSP FAS 157-4, provides guidelines for
making fair value measurements more consistent with the principles presented in
SFAS 157. FSP FAS 157-4 provides additional authoritative guidance in
determining whether a market is active or inactive, and whether a transaction is
distressed. This FSP is applicable to all assets and liabilities (i.e. financial
and nonfinancial) and will require enhanced disclosures.




ii) FASB
Staff Position FAS 115-2 and FAS 124-2, "Recognition and Presentation of
Other-Than-Temporary Impairments", or FSP FAS 115-2 and FAS 124-2, provides
additional guidance to provide greater clarity about the credit and noncredit
component of an other-than-temporary impairment event and to more effectively
communicate when an other-than-temporary impairment event has occurred. This FSP
applies to debt securities.




iii) FASB
Staff Position FAS 107-1 and APB 28-1, "Interim Disclosures about Fair Value of
Financial Instruments", or FSP FAS 107-1 and APB 28-1, amends FASB Statement
No.107, "Disclosures about Fair Value of Financial Instruments", to require
disclosures about fair value of financial instruments in interim as well as in
annual financial statements. This FSP also amends APB Opinion No. 28, "Interim
Financial Reporting", to require those disclosures in all interim financial
statements.




These
standards are effective for periods ending after June 15, 2009. The Company is
evaluating the impact these standards will have on its consolidated financial
statements.




In April
2009, the SEC released Staff Accounting Bulletin No. 111 (“SAB 111”), which
amends SAB Topic 5-M. SAB 111 notes that FSP No. 115-2 and FAS 124-2 were scoped
to debt securities only, and the FSP referred readers to SEC SAB Topic 5-M for
factors to consider with respect to other-than-temporary impairments for equity
securities. With the amendments in SAB 111, debt securities are excluded from
the scope of Topic 5-M, but the SEC staff’s views on equity securities are still
included within the topic. The Company currently does not have any financial
assets that are other-than-temporary impaired.


F-6




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




3.
            Plant
      and Equipment




Plant and
equipment is comprised of the following:




March
      31,
                          
                          
                          
                          
                          
                          December
      31,2009
                          
                          
                          
                          
                          
                          2008Accumulated
                          
                          
                          
                          
                          
                          AccumulatedCost
                          
                          
                          Depreciation
                          
                          
                          Cost
                          
                          
                          DepreciationFurniture
      and equipment
                          
                          $
                          69,940
                          
                          
                          $
                          38,700
                          
                          
                          $
                          69,940
                          
                          
                          $
                          37,405Computer
      equipment
                          
                          
                          142,521
                          
                          
                          
                          117,596
                          
                          
                          
                          140,751
                          
                          
                          
                          110,701Leasehold
      improvements
                          
                          
                          2,592
                          
                          
                          
                          2,277
                          
                          
                          
                          2,592
                          
                          
                          
                          2,250$
                          215,053
                          
                          
                          $
                          158,573
                          
                          
                          $
                          213,283
                          
                          
                          $
                          150,356Net
      carrying amount
                          
                          
                          
                          
                          
                          $
                          56,480
                          
                          
                          
                          
                          
                          
                          $
                          62,927




Depreciation
expenses of $7,584 (2008 - $10,572) and $632 (2008 - $985) have been included in
research and development, and general and administrative expenses,
respectively.




4.
            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
6.  As of March 31, 2009 and December 31, 2008, the line of credit had
an outstanding balance of $299,484 and $305,876, respectively.




5.
            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 March 31, 2009 and December 31, 2008, the amount of
the liabilities accrued were $263,436 and $272,653, respectively. Severance pay
expenses for the three months ended March 31, 2009, and 2008 were $16,444 and
$25,218 respectively.


F-7




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




5.
            Accrued Severance
      Pay (cont'd)




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.




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 March
31, 2009, and December 31, 2008, were $161,030 and $158,022,
respectively.  Income earned from the deposit funds for 2009, and
2008, was immaterial.




6.
            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




December
      31,2009
                    
                    
                    2008Issued: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" ("SFAS 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
                  
                  
                  2008Israel
                  
                  
                  International
                  
                  
                  Israel
                  
                  
                  InternationalInterest
      rate
                  
                  
                  1.2
                  %
                  
                  
                  1.2
                  %
                  
                  
                  1.2
                  %
                  
                  
                  1.2
                  %Expected
      volatility
                  
                  
                  138
                  %
                  
                  
                  138
                  %
                  
                  
                  138
                  %
                  
                  
                  138
                  %Expected
      life in years
                  
                  
                  2.75
                  
                  
                  
                  4.75
                  
                  
                  
                  3
                  
                  
                  
                  5


F-8




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




6.
            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 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 March 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
March 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 March 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.


F-9




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




6.
            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 March
31, 2009, 3,672 options under the Israel 2001 Share Option Plan for common stock
were not yet granted and available for future grant.


F-10




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




6.
            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. As of March 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 lowered 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 have
been included in general and administrative and research and development
expenses, respectively.




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
                      
                      $
                      9,000Year
      ended December 31, 2002
                      
                      
                      -Year
      ended December 31, 2003
                      
                      
                      384,889Year
      ended December 31, 2004
                      
                      
                      25,480Year
      ended December 31, 2005
                      
                      
                      13,733Year
      ended December 31, 2006
                      
                      
                      117,044Year
      ended December 31, 2007
                      
                      
                      181,622Year
      ended December 31, 2008
                      
                      
                      583,477Three
      months ended March 31, 2009
                      
                      
                      54,354$
                      1,369,599


F-11




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




6.
            Capital Stock(cont'd)




Stock
Options (cont'd):




The
following table summarizes the activity of common stock options during the three
months ended March 31, 2009 and the year ended December 31, 2008:




2009
                                          
                                          
                                          2008Israel
                                          
                                          
                                          International
                                          
                                          
                                          Israel
                                          
                                          
                                          InternationalOutstanding,
      beginning of period
                                          
                                          
                                          25,901,400
                                          
                                          
                                          
                                          28,176,797
                                          
                                          
                                          
                                          18,209,767
                                          
                                          
                                          
                                          16,776,797Granted
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          8,500,000
                                          
                                          
                                          
                                          11,900,000Forfeited
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          (808,367
                                          )
                                          
                                          
                                          (500,000
                                          )Outstanding,
      end of period
                                          
                                          
                                          25,901,400
                                          
                                          
                                          
                                          28,176,797
                                          
                                          
                                          
                                          25,901,400
                                          
                                          
                                          
                                          28,176,797Weighted
      average fair value of options granted during the period
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          0.0160
                                          
                                          
                                          $
                                          0.0172Weighted
      average exercise price of common stock options, beginning of
      period
                                          
                                          $
                                          0.0315
                                          
                                          
                                          $
                                          0.0356
                                          
                                          
                                          $
                                          0.0493
                                          
                                          
                                          $
                                          0.0792Weighted
      average exercise price of common stock options granted in the
      period
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          -
                                          
                                          
                                          $
                                          0.0318
                                          
                                          
                                          $
                                          0.0414Weighted
      average exercise price of common stock options, end of
    period
                                          
                                          $
                                          0.0315
                                          
                                          
                                          $
                                          0.0356
                                          
                                          
                                          $
                                          0.0315
                                          
                                          
                                          $
                                          0.0356Weighted
      average remaining contractual life of common stock options
                                          
                                          
                                          2.48
      years
                                          
                                          
                                          
                                          2.81
      year
                                          
                                          
                                          
                                          2.72
      years
                                          
                                          
                                          
                                          3.08
      years




The stock
options have not been included in the calculation of the diluted earnings per
share as their effect would be anti-dilutive.




7.
            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.


F-12




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




7.
            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:





December
      31,2009
                      
                      
                      2008Deferred
      income tax assetsLoss
      carryforwards
                      
                      $
                      3,010,000
                      
                      
                      $
                      3,049,000Less:
      Valuation allowance
                      
                      
                      (3,010,000
                      )
                      
                      
                      (3,049,000
                      )Total
      net deferred tax assets
                      
                      $
                      -
                      
                      
                      $
                      -




For the
three months ended March 31, 2009 and the year ended December 31, 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
March 31, 2009, the Company had approximately$11,942,000 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
                                        
                                        $
                                        778,5002021
                                        
                                        
                                        2,398,0002022
                                        
                                        
                                        778,0002023
                                        
                                        
                                        5,005,0002024
                                        
                                        
                                        581,0002025
                                        
                                        
                                        560,5002026
                                        
                                        
                                        196,0002027
                                        
                                        
                                        700,0002028
                                        
                                        
                                        945,000$
                                        11,942,000




As of
March 31, 2009, the Company had approximately $90,000in tax losses in its
Israeli subsidiary which will carryforward indefinitely.


F-13




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




8.
            Related
      Party Transactions




During
the three months ended March 31, 2009, the Company incurred directors'
consulting fees and salaries in the amount of $34,998 (2008 - $34,998). As of
March 31, 2009, $585,390 (December 31, 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.




9.
            Significant
      Customers




For the
three months ended March 31, 2009, the Company had four major customers which
primarily accounted for 35%, 18%, 17% and 11% of total revenues. For the three
months ended March 31, 2008, the Company had four major customers which
accounted for 48%, 11%, 10% and 10% of total revenues.




10.
            Segmented
      Information




Israel
                          
                          
                          USA
                          
                          
                          TotalGross
      revenue
                          
                          March
      31, 2009
                          
                          
                          $
                          165,683
                          
                          
                          $
                          627,096
                          
                          
                          $
                          792,779March
      31, 2008
                          
                          
                          $
                          20,809
                          
                          
                          $
                          661,768
                          
                          
                          $
                          682,577Net
      income (loss)
                          
                          March
      31, 2009
                          
                          
                          $
                          41,504
                          
                          
                          $
                          128,734
                          
                          
                          $
                          170,238March
      31, 2008
                          
                          
                          $
                          (44,036
                          )
                          
                          $
                          (165,856
                          )
                          
                          $
                          (209,892
                          )Total
      assets
                          
                          March
      31, 2009
                          
                          
                          $
                          241,916
                          
                          
                          $
                          769,299
                          
                          
                          $
                          1,011,215December
      31, 2008
                          
                          
                          $
                          134,107
                          
                          
                          $
                          761,519
                          
                          
                          $
                          895,626




For the
three months ended March 31, 2009, the Company derived 17% (2008 - 13%) of its
revenues from sales to the Far East, 16% from sales to Europe (2008 - 21 %) and
67% (2008 - 66 %) from sales to America.


F-14




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




11.
            Commitments
      and Contingencies




The
Company is committed under an operating lease for its premises expiring June 30,
2010. Minimum annual payments (exclusive of taxes, insurance, and maintenance
costs) are as follows:




2009
                      
                      $
                      53,1002010
                      
                      
                      35,400$
                      88,500




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




2009
                      
                      $
                      62,5302010
                      
                      
                      51,1802011
                      
                      
                      20,6602012
                      
                      
                      3,200$
                      137,570




Rent
expense paid during the three months ended March 31, 2009 and 2008 was
$22,311and
$16,968, respectively.




12.
            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.


F-15




M-WISE,
INC. AND SUBSIDIARY


Notes to
Condensed Consolidated Financial Statements


March 31,
2009 and 2008


Unaudited




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, 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.


F-16




Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations




The
following discussion should be read in conjunction with our consolidated
financial statements and related notes included elsewhere in this Quarterly
Report.





This
filing contains forward-looking statements. The words "anticipate," "believe,"
"expect, "plan," "intend," "seek," "estimate," "project," "will," "could,"
"may," and similar expressions are intended to identify forward-looking
statements. These statements include, among others, information regarding future
operations, future capital expenditures, and future net cash flow. Such
statements reflect our management’s current views with respect to future events
and financial performance and involve risks and uncertainties, including,
without limitation: (a) the timing of our sales could fluctuate and lead to
performance delays; (b) without additional equity or debt financing we cannot
carry out our business plan; (c) our stockholders have pre-emptive rights to
purchase securities of m-Wise, which could impair our ability to raise capital;
(d) we operate internationally and are subject to currency fluctuations, which
could cause us to incur losses even if our operations are profitable; (e) we are
dependent upon certain major customers, and the loss of one or more of such
customers could adversely affect our revenues and profitability; (f) our
research and development facilities are located in Israel and we have important
facilities and resources located in Israel which could be negatively affected
due to military or political tensions; (g) certain of our officers and employees
are required to serve in the Israel defense forces and this could force them to
be absent from our business for extended periods; (h) the rate of inflation in
Israel may negatively impact our costs if it exceeds the rate of devaluation of
the NIS against the U.S. Dollar. Should one or more of these risks or
uncertainties occur, or should underlying assumptions prove to be incorrect,
actual results may vary materially and adversely from those anticipated,
believed, estimated or otherwise indicated. These forward-looking statements
speak only as of the date of this Quarterly Report.  Subject at all
times to relevant federal and state securities law disclosure requirements, we
expressly disclaim any obligation or undertaking to disseminate any update or
revisions to any forward-looking statement contained herein to reflect any
change in our expectations with regard thereto or any changes in events,
conditions or circumstances on which any such statement is
based.  Consequently, all of the forward-looking statements made in
this Quarterly Report are qualified by these cautionary statements and there can
be no assurance of the actual results or developments.





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. We gained strong credibility and experience
as a wireless application service provider during calendar years 2000 and 2001,
while we continued to build and develop our wireless middleware product.
However, due to the high costs and low revenues in the European wireless
application service provider (ASP) market, in 2002, our management decided to
transition our focus away from pan-European wireless application service
providers, toward installing and licensing our middleware technology at cellular
operators and wireless application service providers worldwide, and to operate
through original equipment manufacturers (OEMs) and regional sales
representatives to sell our products.  Our shift away from hosted
wireless application services using our Platform enabled us to focus more on the
core middleware benefits of our technology in fiscal 2002.


3





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, 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. 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.  In
addition, we restructured our sales efforts toward establishing distribution
channels via OEMs and partnerships with major IT vendors and system
integrators.  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.




During
calendar 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 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 many potential customers preferred to outsource platform
functionalities to service providers (ASPs) rather than to purchase platform and
install on site (Customer Premises Model) and we invested significant funds and
efforts in the infrastructure that was required for this ASP model. During 2006,
we invested extensive efforts in establishing our customer base and expanding
our distribution channels, by enhancing our technology and expanding the terms
and scope of our relationships with our customers.





During
calendar 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.


4





During
calendar 2008, we expanded our business in our primary markets of the USA and
Brazil. Our US presence, which we established in 2007, is developing and
expanding as we had hoped, and we signed new deals in this territory this year.
We have 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
2009. We also laid the groundwork for two additional significant business deals
in the US which we expect to execute early 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 expect to see significant results of these deals
in 2009. We have also been able to strengthen our partnerships with existing
customers, Thumbplay, Arvato Mobile, Interchan, Logia Mobile and Supportcomm and
have been 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 have 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
have seen the implication of the global economy downturn reflected in the
activity of some of our customers, yet despite that, we have seen a significant
improvement in our revenue growth of 23% since 2007.




During
the first quarter of 2009, we expanded our business in our primary markets of
the USA and Brazil. Our US presence, which we established in late 2007, has
developed and expanded as we had hoped, and we signed new deals in this
territory. We have geared our special expertise in the mobile marketing industry
and signed deals with leading players such as The Secret and WPP’s advertising
and PR agency Burson Marsteller. We have also launched a major customer in the
Brazilian market and we expect to see significant revenues coming from this
customer this year. We have further created a strategic alliance with Ozonion,
an important player in the Brazilian mobile entertainment market and we expect
to see new deals coming through this partnership. We have seen the implication
of the global economy downturn reflected in the activity of some of our
customers, yet despite that, we have seen a significant improvement in our
revenue growth of 16% from the comparative quarter of last year.





For the
rest of calendar 2009, we plan to emphasize the resource-saving advantages
of our technology, and are planning to target those potential customers who can
significantly benefit from outsourcing their technical services to us instead of
continuing the research and development in-house. We believe that 2009 will be
characterized by serious efforts by many enterprises to save on expenses as a
result of the current state of the global economy, and we plan to offer our
relative advantages in that respect. Additionally, we intend to deepen our
presence in the emerging market of Brazil and expand our business alliances in
that region with an objective to expand beyond Brazil and extend our technology
offering to large neighboring regions such as Mexico and Argentina. We also plan
to expand further into the mobile entertainment market in the USA, especially in
the music market, and leverage our existing relationship with Universal Records
to gain additional mobile entertainment and infotainment deals. In all cases, we
plan to continue our software-as-a-service based business model and use our
successes in an effort to generate reoccurring revenues that will provide us
with future stability.


5




We
believe that the strength of our technology and position in the market allows
some of our potential customers to become more effective with our technology and
therefore, despite of the global economy downturn and based on the current sales
pipeline we have, we expect 2009 to be another year of growth in revenues where
we expect to achieve profitability.





Revenues





Our
revenues grew 16% from $682,577 in the three months ended March 31, 2008 to
$792,779 in the three months ended March 31, 2009, and from $2,295,260 in the
year ended December 31, 2007 to $2,833,626in the year ended December
31, 2008. Management believes that our efforts to refocus our resources towards
building relationships with OEMs may yield additional contracts. Although we are
currently involved in negotiations for several new contracts, there can be no
assurance that such contracts will be secured or that they will generate
significant revenue. We derive revenues from product sales, licensing, revenue
share, customer services and technical support.





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. For the three months ended March
31, 2009, approximately 35% of our sales were derived from sales to Thumbplay,
18% to Arvato Mobile and 17% to Comtrend Corporation.  For the three
months ended March 31, 2008, approximately 48%of our sales were derived
from sales to Thumbplay, 11%to mBlox,10%to
Arvato Mobileand 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 the
Far East. For the three months ended March 31, 2009, we derived 67% of our
revenues from sales in America, 17% from sales in the Far East and 16% from
sales in Europe. 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





Customer
services and technical support cost of revenues consist of the salary and
related costs for our technical staff that provide those services and support
and related overhead expenses.


6





Operating
expense





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.





On-going
service and technical support contracts are negotiated separately at an
additional fee. The technical support is separate from the functionality of the
products, which can function without on-going support.


7





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




THREE
MONTHS ENDED MARCH 31, 2009, COMPARED WITH THE THREE MONTHS ENDED MARCH 31,
2008.




Revenues





License fees and products. Revenues
from license fees and products decreased 40% to $99,999 for the three months
ended March 31, 2009 from $167,519 for the same period in 2008. This decrease in
revenues of $67,520 was derived from a one time license fee paid in
2008.





Revenue
share. Revenues from revenue share increased 61% to $329,242 for the three
months ended March 31, 2009, from $204,798 for the same period in
2008.   The increase is primarily due to revenues received from
current customers who were not our customers during 2008 and from customers that
did not previously generate revenues from selling services to end
users.





Customer
services and technical support. Revenues from customer services and technical
support increased 17% to $363,538 for the three months ended March 31, 2009,
from $310,260 for the same period in 2008.





Cost of
revenues.





Cost of
revenues decreased 23% to $178,365 for the three months ended March 31, 2009,
from $232,776 for the same period in 2008. The decrease was primarily due to
lower costs associated with our revenue share income.





Operating
expenses.





Research and
development.





Research
and development expenses decreased 32% to $139,119 for the three months ended
March 31, 2009, from $205,226 for the same period in 2008. This decrease was
primarily due to a $54,129 decrease in payroll and related expenses. Research
and development expenses, stated as a percentage of revenues decreased to 18%
for the three months ended March 31, 2009, from 30% for the same period in
2008.


8





General and
administrative.





General
and administrative expenses decreased 22% to $335,052 for the three months ended
March 31, 2009, from $431,382 for the same period in 2008. This decrease was
primarily due to a $47,035 decrease in payroll and related expenses and a
$29,237 decrease in marketing expenses. General and administrative expenses,
stated as a percentage of revenues, decreased to 42% for the three months ended
March 31, 2009, from 63% for the same period in 2008.





Financing income and
expenses.





Financing
income was $11,825 for the three months ended March 31, 2009, compared with
financing expenses of $23,085 for the same period in 2008.




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 $282,018 as of
March 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. and as of
the date of this quarterly report we have no funds available to us under bank
lines of credit. We have a credit line agreement for $500,000 with Miretzky
Holdings Limited. As of March 31, 2009, $299,484 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 have an equity line
for $10.0 million with Dutchess Private Equity Fund and as of March 31, 2009 and
May 14, 2009 we have drawn $828,675 under the Equity Line. 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 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 three months ended March 31,
2009, net cash provided by operating activities was $120,973 primarily due to
our net earnings of $152,068 and $54,354 in employee vested options expense,
partially offset by a $58,234 decrease in other payables and accrued expenses
and a $17,678 increase in accounts receivable - trade. In the same period in
2008, net cash used in operating activities was $259,480 primarily due to our
net loss of $209,892 and a $78,673 decrease in other payables and accrues
expenses, partially offset by $86,269 in employee vested options
expense.


9





Investing and financing
activities.





Property
and equipment consist primarily of computers, software, and office equipment.
For the three months ended March 31, 2009, net cash used in investing activities
was $1,769 consisting of an investment of $1,769 in equipment. In the same
period in 2008, net cash used in investing activities was $3,346 consisting of
an investment in equipment.  For the three months ended March 31,
2009, net cash used in financing activities was $6,392 due to a decrease in
advances from shareholders. In the same period in 2008, net cash provided by
financing activities was $5,858 primarily due to a $5,204 increase in bank
indebtedness.




Dividends





We have
not paid any dividends on our common stock. We currently intend to retain any
earnings for use in our business, and therefore do not anticipate paying cash
dividends in the foreseeable future.





Off
Balance Sheet Arrangements





None.




Item
      3.
            Quantitative
      and Qualitative Disclosures about Market
Risk




Not
applicable.




Item
      4T.
            Controls
      and Procedures




Evaluation
of Disclosure Controls and Procedures





Our
management, with the participation of our Chief Executive Officer and Chief
Financial Officer, evaluated the effectivness 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 the end of the
period covered by this quarterly report. 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 upon this evaluation, our Chief Executive Officer
and Chief Financial Officer concluded that, as of March 31, 2009, our disclosure
controls and procedures were (1) effective in ensuring that 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) effective in that they provide that
material 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, and is accumulated and communicated to management,
to allow for timely decisions.





Changes
in Internal Control Over Financial Reporting





There
were no changes in our internal control over financial reporting identified in
connection with the evaluation described above during the quarter ended March
31, 2009 that has materially affected or is reasonably likely to materially
affect our internal controls over financial reporting.


10




PART
II:


OTHER
INFORMATION




Item
      1.
            Legal
      Proceedings




None.




Item
      1A.
            Risk
      Factors




Not
applicable.




Item
      2.
            Unregistered
      Sales of Equity Securities and Use of
Proceeds




None.




Item
      3.
            Defaults
      upon Senior Securities




Not
applicable.




Item
      4.
            Submission
      of Matters to a Vote of Security
Holders




Not
applicable.




Item
      5.
            Other
      Information




Not
applicable.




Item
      6.
            Exhibits




Exhibit No.
                  
                  Description3.1
                  
                  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)




11


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)21
                    
                    List
      of Subsidiaries(2)31.1
                    
                    Rule
      13a-14(a)/15d-14(a) Certification.(1)31.2
                    
                    Rule
      13a-14(a)/15d-14(a) Certification.(1)32.1
                    
                    Certification
      by the Chairman Relating to a Periodic Report Containing Financial
      Statements.(1)32.2
                    
                    Certification
      by the Chief Financial Officer Relating to a Periodic Report Containing
      Financial Statements.(1)




(1)           Filed
herewith.




12




(2)           Incorporated
by reference from the registration statement filed with the Securities and
Exchange Commission Registration Statement on Form SB-2 (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.


13




SIGNATURES




Pursuant
to the requirements 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.
                    (Registrant)





May
      14, 2009
                        By:
                        /s/ Mordechai
      BroudoMordechai
      BroudoChairmanMay
      14, 2009
                        By:
                        /s/ Gabriel
      KabazoGabriel
      KabazoChief
      Financial Officer
                          (principal
      financial officer
                          and
      principal accounting
                          officer)


14