Item
1. Financial Statements.
My
Size, Inc. and Subsidiaries
Condensed
Consolidated
Interim
Financial
Statements
as
of March 31, 2019
(unaudited)
U.S.
Dollars in Thousands
My
Size, Inc. and its subsidiaries
Condensed
Consolidated Interim Financial Statements as of March 31, 2019 (Unaudited)
Contents
|
Page
|
|
|
Condensed
Consolidated Interim Balance Sheets
|
3
|
|
|
Condensed
Consolidated Interim Statements of Comprehensive Loss
|
4
|
|
|
Condensed
Consolidated Interim Statements of Changes in Stockholders’ Equity (Deficit)
|
5
|
|
|
Condensed
Consolidated Interim Statements of Cash Flows
|
6
|
|
|
Notes
to Condensed Consolidated Interim Financial Statements
|
7-12
|
My
Size, Inc. and its subsidiaries
Condensed
Consolidated Interim Balance Sheets
U.S.
dollars in thousands (except share data)
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
(Audited)
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
5,277
|
|
|
|
5,140
|
|
Restricted cash
|
|
|
274
|
|
|
|
90
|
|
Restricted deposit
|
|
|
-
|
|
|
|
181
|
|
Short-term deposit
|
|
|
-
|
|
|
|
1,209
|
|
Other receivables and prepaid expenses
|
|
|
183
|
|
|
|
218
|
|
Total current assets
|
|
|
5,734
|
|
|
|
6,838
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
72
|
|
|
|
71
|
|
Right of use assets
|
2d
|
|
103
|
|
|
|
-
|
|
Investment in marketable securities
|
|
|
29
|
|
|
|
208
|
|
|
|
|
204
|
|
|
|
279
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
5,938
|
|
|
|
7,117
|
|
|
|
|
|
|
|
|
|
|
Liabilities and stockholders’ equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Trade payables
|
|
|
297
|
|
|
|
295
|
|
Accounts payable
|
|
|
314
|
|
|
|
276
|
|
Warrants, derivatives and stock based compensation liabilities
|
|
|
1,196
|
|
|
|
1,252
|
|
Operating lease liabilities
|
2d
|
|
70
|
|
|
|
-
|
|
Total current liabilities
|
|
|
1,877
|
|
|
|
1,823
|
|
|
|
|
|
|
|
|
|
|
Operating lease liabilities
|
2d
|
|
30
|
|
|
|
-
|
|
Total non-current liabilities
|
|
|
30
|
|
|
|
-
|
|
Total liabilities
|
|
|
1,907
|
|
|
|
1,823
|
|
|
|
|
|
|
|
|
|
|
COMMITMENTS AND CONTINGENCIES
|
|
|
|
|
|
|
|
|
Stockholders’ equity:
|
|
|
|
|
|
|
|
|
Stock Capital -
|
|
|
|
|
|
|
|
|
Common stock of $ 0.001 par value - Authorized: 100,000,000 shares;
Issued and outstanding: 29,852,389 as of March 31, 2019 and December 31, 2018
|
|
|
30
|
|
|
|
30
|
|
Additional paid-in capital
|
|
|
29,216
|
|
|
|
29,116
|
|
Accumulated other comprehensive loss
|
|
|
(671
|
)
|
|
|
(835
|
)
|
Accumulated deficit
|
|
|
(24,544
|
)
|
|
|
(23,017
|
)
|
Total stockholders’ equity
|
|
|
4,031
|
|
|
|
5,294
|
|
Total liabilities and stockholders’ equity
|
|
|
5,938
|
|
|
|
7,117
|
|
The
accompanying notes are an integral part of the condensed consolidated interim financial statements.
My
Size, Inc. and its subsidiaries
Condensed
Consolidated Interim Statements of Comprehensive Loss
U.S.
dollars in thousands (except share data and per share data)
|
|
Three-Months Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
(Unaudited)
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
20
|
|
|
|
-
|
|
Cost of revenues
|
|
|
(1
|
)
|
|
|
-
|
|
Gross profit
|
|
|
19
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
(292
|
)
|
|
|
(265
|
)
|
Marketing, general and administrative
|
|
|
(990
|
)
|
|
|
(1,612
|
)
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
(1,282
|
)
|
|
|
(1,877
|
)
|
Operating loss
|
|
|
(1,263
|
)
|
|
|
(1,877
|
)
|
Financial expenses, net
|
|
|
(264
|
)
|
|
|
(3,546
|
)
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(1,527
|
)
|
|
|
(5,423
|
)
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation differences
|
|
|
164
|
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss
|
|
|
(1,363
|
)
|
|
|
(5,583
|
)
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per share
|
|
|
(0.05
|
)
|
|
|
(0.20
|
)
|
Basic and diluted weighted average number of shares outstanding
|
|
|
29,852,389
|
|
|
|
27,387,726
|
|
The
accompanying notes are an integral part of the condensed consolidated interim financial statements
My
Size, Inc. and its subsidiaries
Condensed
Consolidated Interim Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)
U.S.
dollars in thousands (except share data)
|
|
Common
stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
other
comprehensive
|
|
|
Accumulated
|
|
|
Total
stockholders’
equity
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
loss
|
|
|
deficit
|
|
|
(deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2019
|
|
29,852,389
|
|
|
30
|
|
|
29,116
|
|
|
(835)
|
|
|
(23,017)
|
|
|
5,294
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation related to employees
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19
|
|
Stock-based
compensation related to consultants
|
|
|
-
|
|
|
|
-
|
|
|
|
81
|
|
|
|
-
|
|
|
|
|
|
|
|
81
|
|
Total
comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
164
|
|
|
|
(1,527)
|
|
|
|
(1,363)
|
|
Balance
as of March 31, 2019
|
|
|
29,852,389
|
|
|
|
30
|
|
|
|
29,216
|
|
|
|
(671)
|
|
|
|
(24,544)
|
|
|
|
4,031
|
|
|
|
Common
stock
|
|
|
Additional
paid-in
|
|
|
Accumulated
other
comprehensive
|
|
|
Accumulated
|
|
|
Total
stockholders’
equity
|
|
|
|
Number
|
|
|
Amount
|
|
|
capital
|
|
|
loss
|
|
|
deficit
|
|
|
(deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance
as of January 1, 2018
|
|
22,238,745
|
|
|
22
|
|
|
16,008
|
|
|
(134)
|
|
|
(17,048)
|
|
|
(1,152)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based
compensation related to employees
|
|
|
-
|
|
|
|
-
|
|
|
|
96
|
|
|
|
-
|
|
|
|
-
|
|
|
|
96
|
|
Issuance
of shares to consultants
|
|
|
164,000
|
|
|
|
(*)
|
|
|
|
135
|
|
|
|
-
|
|
|
|
-
|
|
|
|
135
|
|
Total
comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(160)
|
|
|
|
(5,423)
|
|
|
|
(5,583)
|
|
Exercise
of warrants and options
|
|
|
3,513,182
|
|
|
|
4
|
|
|
|
7,915
|
|
|
|
|
|
|
|
|
|
|
|
7,919
|
|
Issuance
and receipts on account of shares, net of issuance cost of $351
|
|
|
3,230,000
|
|
|
|
3
|
|
|
|
3,544
|
|
|
|
|
|
|
|
|
|
|
|
3,547
|
|
Balance
as of March 31, 2018
|
|
|
29,145,927
|
|
|
|
29
|
|
|
|
27,698
|
|
|
|
(294)
|
|
|
|
(22,471)
|
|
|
|
4,962
|
|
|
(*)
|
Represent
an amount less than $1.
|
The
accompanying notes are an integral part of the condensed consolidated interim financial statements
My
Size, Inc. and its subsidiaries
Condensed
Consolidated Interim Statements of Cash Flows
|
|
Three-Months
Ended
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
|
|
$
thousands
(Unaudited)
|
|
|
$
thousands
(Unaudited)
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
(1,527
|
)
|
|
|
(5,423
|
)
|
Adjustments
to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
36
|
|
|
|
8
|
|
Interest
payment of short-term loan
|
|
|
-
|
|
|
|
(192
|
)
|
Revaluation
of warrants, derivatives, stock-based compensation liabilities and convertible loan
|
|
|
(95
|
)
|
|
|
3,874
|
|
Interest
and revaluation of short-term deposit
|
|
|
54
|
|
|
|
-
|
|
Interest
received from short-term deposit
|
|
|
16
|
|
|
|
-
|
|
Revaluation
of investment in marketable securities
|
|
|
185
|
|
|
|
(188
|
)
|
Increase
in operating lease liabilities
|
|
|
(39
|
)
|
|
|
-
|
|
Interest
of operating lease liabilities
|
|
|
6
|
|
|
|
-
|
|
Stock
based compensation- equity
|
|
|
100
|
|
|
|
231
|
|
Stock
based compensation- liability
|
|
|
-
|
|
|
|
434
|
|
Decrease
in other receivables and prepaid expenses
|
|
|
43
|
|
|
|
2
|
|
Decrease
in trade payable
|
|
|
(8
|
)
|
|
|
(22
|
)
|
Increase
in accounts payables
|
|
|
30
|
|
|
|
84
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
|
(1,199
|
)
|
|
|
(1,192
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from short-term deposit
|
|
|
1,200
|
|
|
|
-
|
|
Proceeds
from restricted deposit
|
|
|
181
|
|
|
|
-
|
|
Purchase
of property and equipment
|
|
|
(6
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Net
cash provided by (used in) investing activities
|
|
|
1,375
|
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from exercise of warrants and options
|
|
|
-
|
|
|
|
3,626
|
|
Repayment
of short-term loan
|
|
|
-
|
|
|
|
(555
|
)
|
Proceeds
from issuance of shares, warrants, short term loan and convertible loan
|
|
|
-
|
|
|
|
5,923
|
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
|
8,994
|
|
|
|
|
|
|
|
|
|
|
Effect
of exchange rate fluctuations on cash and cash equivalents
|
|
|
145
|
|
|
|
(209
|
)
|
|
|
|
|
|
|
|
|
|
Increase
in cash, cash equivalents and restricted cash
|
|
|
321
|
|
|
|
7,592
|
|
Cash,
cash equivalents and restricted cash at the beginning of the period
|
|
|
5,230
|
|
|
|
1,872
|
|
|
|
|
|
|
|
|
|
|
Cash,
cash equivalents and restricted cash at the end of the period
|
|
|
5,551
|
|
|
|
9,464
|
|
|
|
|
|
|
|
|
|
|
Non
cash transactions
|
|
|
|
|
|
|
|
|
Exercise
of warrants and share-based payment compensation to equity
|
|
|
-
|
|
|
|
4,293
|
|
The
accompanying notes are an integral part of the condensed consolidated interim financial statements.
My
Size, Inc. and its subsidiaries
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
1 - General
|
a.
|
My
Size, Inc. is developing unique measurement technologies based on algorithms with applications in a variety of areas,
from the apparel e-commerce market, to the courier services market and to the Do It Yourself
smartphone and tablet apps market. The technology is driven by proprietary algorithms which are
able to calculate and record measurements in a variety of novel ways.
|
|
|
|
|
|
The Company has two subsidiaries, My Size Israel 2014 Ltd. and Topspin Medical (Israel) Ltd., both of
which are incorporated in Israel. References to the Company include the subsidiaries unless the context indicates otherwise.
|
|
|
|
|
b.
|
During
the three month period ended March 31, 2019, the Company has incurred significant losses and negative cash flows from
operations and as of March 31, 2019, has an accumulated deficit of $24,544. The Company has financed its operations mainly
through fundraising from various investors.
Management’s
plans contemplate that the cash on hand will be sufficient to meet its obligations for a period which is longer than 12
months.
|
Note
2 - Significant Accounting Policies
|
a.
|
Unaudited
condensed consolidated financial statements:
|
The
accompanying unaudited condensed consolidated interim financial statements included herein have been prepared by the Company in
accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The unaudited
condensed consolidated financial statements are comprised of the financial statements of the Company. In management’s opinion,
the interim financial data presented includes all adjustments necessary for a fair presentation. All intercompany accounts and
transactions have been eliminated. Certain information required by U.S. generally accepted accounting principles (“GAAP”)
has been condensed or omitted in accordance with rules and regulations of the SEC. Operating results for the three months ended
March 31, 2019 are not necessarily indicative of the results that may be expected for any future period or for the year ending
December 31, 2019.
These
unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated
financial statements and the notes thereto for the year ended December 31, 2018.
The
preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect
the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially
from these estimates.
My
Size, Inc. and its subsidiaries
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
2 - Significant Accounting Policies (cont’d)
|
c.
|
Revenue from Contracts
with Customers:
|
The Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with
Customers (Topic 606) (ASU 2014-09), an updated standard on revenue recognition and issued subsequent amendments to the
initial guidance in March 2016, April 2016, May 2016 and December 2016 within ASU 2016-08, 2016-10, 2016-12 and 2016-20,
respectively (collectively, “ASC 606”). The core principle of the new standard is for companies to recognize
revenue to depict the transfer of services to customers in amounts that reflect the consideration to which the
company expects to be entitled in exchange for those goods and services. In addition, the new standard requires expanded
disclosures. The Company has adopted the standard effective January 1, 2018. The reported results for the three months ended
March 31, 2019 reflect the application of ASC 606 guidance.
To recognize revenue under ASC
606, the Company applies the following five steps:
|
1.
|
Identify the contract with a customer. A contract with a customer exists when the Company enters into an enforceable contract with a customer and the Company determines that collection of substantially all consideration for the services is probable.
|
|
2.
|
Identify the performance obligations in the contract.
|
|
3.
|
Determine the transaction price. The transaction price is determined based on the consideration to which the Company will be entitled in exchange for providing the service to the customer.
|
|
4.
|
Allocate the transaction price to performance obligations in the contract. If a contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation.
|
|
5.
|
Recognize revenue when or as the Company satisfies a performance obligation. When the Company provides a service, revenue is recognized over the service term.
|
|
d.
|
Impact of recently adopted accounting standard:
|
In
February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”). ASU 2016-02 is intended to increase
transparency and comparability of accounting for lease transactions. For all leases with terms greater than twelve months, the
new guidance will require lessees to recognize right-of-use assets and corresponding lease liabilities on the balance sheet and
to disclose qualitative and quantitative information about lease transactions. The new standard maintains a distinction between
finance leases and operating leases. As a result, the effect of leases in the statement of operations and statement of cash flows
is largely unchanged. ASU 2016-02 is effective January 1, 2019. In July 2018, the FASB issued ASU 2018-11, Leases - Targeted Improvements,
to allow a company to elect an optional modified retrospective transition method that applies the new lease requirements through
a cumulative-effect adjustment in the period of adoption. Effective January 1, 2019, the Company adopted the new lease accounting
standard using the modified retrospective transition option of applying the new standard at the adoption date. The Company leases
include office space lease agreement and three-year cancelable operating lease agreement for cars. Adoption of the new standard
resulted in the recording of operating lease right-to-use assets and operating lease liabilities on the Company’s consolidated
balance sheets, but did not have an impact on the Company’s beginning balance of retained earnings, consolidated statement
of operations or statement of cash flows. The most significant impact was the recognition of right-to-use assets and lease liabilities
on account of the Company’s operating leases. The Company recognized $127,000
of
right of use assets and operating lease liabilities at January 1, 2019. As of March 31, 2019, total of right-of-use assets related
to the Company’s operating leases was $103,000 and operating lease liabilities and operating lease liabilities non-current
were approximately $70,000 and $30,000, respectively.
My
Size, Inc. and its subsidiaries
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
3 - Financial Instruments
Fair
value of financial instruments:
Accounting
Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, relating to fair value measurements,
defines fair value and established a framework for measuring fair value. ASC 820 fair value hierarchy distinguishes between market
participant assumptions developed based on market data obtained from sources independent of the reporting entity and the reporting
entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances.
ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants at the measurement date, essentially an exit price. In addition, the fair value of assets
and liabilities should include consideration of non-performance risk, which for the liabilities described below includes the Company’s
own credit risk.
In
accordance with ASC820 when measuring the fair value, an entity shall take into account the characteristics of the asset or liability
if a market participant would take those characteristics into account when pricing the asset or liability at the measurement date.
Such characteristics include, for example:
|
a.
|
The
condition and location of the asset.
|
|
b.
|
Restrictions,
if any, on the sale or the use of the asset.
|
As
a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used
in the valuation methodologies in measuring fair value:
|
Level
1 -
|
Valuations
based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuation adjustments
and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and
regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
|
|
|
|
|
Level
2 -
|
Valuations
based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either
directly or indirectly.
|
|
|
|
|
Level
3 -
|
Valuations
based on inputs that are unobservable and significant to the overall fair value measurement.
|
The
expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably
indicative of expected future trends.
The
carrying amounts of cash and cash equivalents, other receivables, short-term loan, trade payables and accounts payable approximate
their fair value due to the short-term maturities of such instruments.
The
Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publicly-traded
company on the OTCQB.
Due
to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market
price for an otherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to
reflect the effect of the sales restrictions and is therefore, ranked as Level 2 assets.
|
|
March 31, 2019
|
|
|
|
Fair value hierarchy
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in marketable securities (*)
|
|
|
-
|
|
|
|
29
|
|
|
|
-
|
|
My
Size, Inc. and its subsidiaries
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
3 - Financial Instruments (cont’d)
|
|
March 31, 2019
|
|
|
|
Fair value hierarchy
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants, Derivative and stock based compensation liabilities
|
|
|
-
|
|
|
|
1,196
|
|
|
|
-
|
|
|
|
December 31, 2018
|
|
|
|
Fair value hierarchy
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in marketable securities (*)
|
|
|
-
|
|
|
|
208
|
|
|
|
-
|
|
|
|
December 31, 2018
|
|
|
|
Fair value hierarchy
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants, Derivatives and stock based compensation liabilities
|
|
|
-
|
|
|
|
1,252
|
|
|
|
-
|
|
(*)
For
the three month period ended March 31, 2019 and 2018, the recognized gain (loss) (based on quoted market prices with a
discount due to security- restrictions on IMine shares) of the marketable securities was ($185) and $188,
respectively.
My
Size, Inc. and its subsidiaries
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
4 - Stock Based Compensation
The
stock based expense recognized in the financial statements for services received is related to research and development, marketing,
general and administrative expenses and shown in the following table:
|
|
Three months ended
March 31,
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
Stock-based compensation expense - equity awards
|
|
|
100
|
|
|
|
231
|
Stock-based compensation expense - liability awards
|
|
|
-
|
|
|
|
434
|
|
|
|
|
|
|
|
|
|
|
|
100
|
|
|
|
665
|
Option
issued to consultants
In January 2019, the Company
entered into an agreement with a consultant (“Consultant12”) to provide services to the Company including promoting
the Company’s products and services via potential sources of media. Pursuant to such agreement and in partial consideration
for such consulting services, the Company agreed to issue to the Consultant12 a warrant to purchase up to 50,000 shares of the
Company’s common stock upon execution of the agreement and after six months, a further warrant to purchase 100,000 shares
of the Company’s common stock. The warrants are exercisable at $1.00 per share and have a term of 12 months from the date
of issuance.
During
the period ended March 31, 2019, an amount of $21 was recorded by the Company as a stock-based equity-awards with respect to the
warrant issued to Consultant12.
Stock
Option Plan for Employees
In
March 2017, the Company adopted a stock option plan (the “Plan”) pursuant to which the Company’s Board of Directors
may grant stock options to officers and key employees. The total number of options which may be granted to directors, officers,
employees under this plan, is limited to 3,000,000 options. Stock options can be granted with an exercise price equal to or less
than the stock’s fair market value at the date of grant.
During
the three month period ended March 31, 2019, no options were granted or exercised and 15,000 options expired.
The
total stock option compensation expense during the three-month period ended March 31, 2019 and 2018 which were recorded as research
and development, marketing and general and administrative expenses were $10, $9, $27 and $69, respectively.
My
Size, Inc. and its subsidiaries
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
5 - Contingencies and Commitments
|
a.
|
On August 7, 2018, the Company commenced
an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York, County of New York
for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to be determined
at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company,
also in the same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement.
On September 6, 2018 North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27,
2018, North Empire filed an answer and asserted counterclaims in the action commenced by the Company against them, alleging that
the Company failed to deliver stock certificates to North Empire causing damage to North Empire in the amount of $10,958,589. North
Empire also filed a third-party complaint against the Company’s CEO and Chairman of the Board asserting similar claims against
them in their individual capacities. On October 17, 2018, the Company filed a reply to North Empire’s counterclaims. On November
15, 2018, the Company’s CEO and Chairman of the Board filed a motion to dismiss North Empire’s third-party complaint.
The parties are engaging in discovery in connection with the claims and counterclaims, and a hearing on the motion to dismiss is
scheduled for May 14, 2019.
The
Company believes it is more likely than not that the counterclaims will be
denied.
|
|
b.
|
On
January 22, 2019, the Company was notified by the Nasdaq Stock Market, LLC (“Nasdaq”) that the Company was not in compliance
with the minimum bid price requirements set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq
Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per
share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists
if the deficiency continues for a period of 30 consecutive business days. The notification provided that the Company had 180 calendar
days, or until July 22, 2019, to regain compliance with Nasdaq Listing Rule 5550(a)(2). To regain compliance, the bid
price of Company’s common stock must have a closing bid price of at least $1.00 per share for a minimum of 10 consecutive
business days. If the Company does not regain compliance by July 22, 2019, an additional 180 days may be granted to regain compliance,
so long as the Company meets the Nasdaq Capital Market continued listing requirements (except for the bid price
requirement) and notifies Nasdaq in writing of the Company’s intention to cure the deficiency during the second compliance
period. If the Company does not qualify for the second compliance period or fails to regain compliance during the second
180-day period, then Nasdaq will notify the Company of its determination to delist the Company’s common stock, at which
point the Company will have an opportunity to appeal the delisting determination to a Hearings Panel.
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis provides information that we believe to be relevant to an assessment and
understanding of our results of operations and financial condition for the periods described. This discussion should be read
together with our condensed consolidated interim financial statements and the notes to the financial statements, which are
included in this Quarterly Report on Form 10-Q. This information should also be read in conjunction with the information
contained in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission
on March 27, 2019, or the Annual Report, including the consolidated annual financial statements as of December 31, 2018 and their
accompanying notes included therein.
This
Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended. Any statements
in this Quarterly Report on Form 10-Q about our expectations, beliefs, plans, objectives, assumptions or future events or performance
are not historical facts and are forward-looking statements. These statements are often, but not always, made through the use
of words or phrases such as “believe,” “will,” “expect,” “anticipate,” “estimate,”
“intend,” “plan” and “would.” For example, statements concerning financial condition, possible
or assumed future results of operations, growth opportunities, industry ranking, plans and objectives of management, markets for
our common stock and future management and organizational structure are all forward-looking statements. Forward-looking statements
are not guarantees of performance. They involve known and unknown risks, uncertainties and assumptions
that may
cause actual results, levels of activity, performance or achievements to differ materially from any results, levels of activity,
performance or achievements expressed or implied by any forward-looking statement.
Any forward-looking
statements are qualified in their entirety by reference to the risk factors discussed throughout this Quarterly Report on Form
10-Q. Some of the risks, uncertainties and assumptions that could cause actual results to differ materially from estimates or projections
contained in the forward-looking statements include but are not limited to:
|
●
|
our history of losses and needs for additional capital
to fund our operations and our inability to obtain additional capital on acceptable terms, or at all;
|
|
●
|
the new and unproven nature of the measurement technology
markets;
|
|
●
|
our ability to achieve customer adoption of our products;
|
|
●
|
our dependence on assets we purchased from a related party and the risk that such assets may
in the future be repurchased;
|
|
●
|
our ability to enhance our brand and increase market
awareness;
|
|
●
|
our ability to introduce new products and continually
enhance our product offerings;
|
|
●
|
the success of our strategic relationships with third
parties;
|
|
●
|
information technology system failures or breaches of
our network security;
|
|
●
|
competition from competitors;
|
|
●
|
our reliance on key members of our management team;
|
|
●
|
current or future litigation; and
|
|
●
|
the impact of the political and security situation in
Israel on our business.
|
The foregoing list
sets forth some, but not all, of the factors that could affect our ability to achieve results described in any forward-looking
statements. You should read this Quarterly Report on Form 10-Q and the documents that we reference herein and have filed as exhibits
to the Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different
from what we expect. You should assume that the information appearing in this Quarterly Report on Form 10-Q is accurate as of the
date hereof. Because the risk factors referred to on page 12 of our Annual Report, could cause actual results or outcomes to differ
materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance
on any forward-looking statements. Further, any forward-looking statement speaks only as of the date on which it is made, and we
undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the
statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible
for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent
to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking
statements. We qualify all of the information presented in this Quarterly Report on Form 10-Q, and particularly our forward-looking
statements, by these cautionary statements.
Unless the context
otherwise requires, all references to “we,” “us,” “our” or “the Company” in this
Quarterly Report on Form 10-Q are to My Size, Inc. a Delaware corporation, and its subsidiaries, including MySize Israel 2014 Ltd.
taken as a whole.
Overview
We are a creator of
mobile device measurement solutions that has developed innovative solutions designed to address shortcomings in multiple verticals,
including the e-commerce fashion/apparel, shipping/parcel and do it yourself, or DIY, industries. Utilizing our sophisticated algorithms
within our proprietary technology, we can calculate and record measurements in a variety of novel ways, and most importantly, increase
revenue for businesses across the globe.
Our solutions can be
utilized to accurately take measurements of a variety of items via a mobile device. By downloading the application to a smartphone,
the user is then able to run the mobile device over the surface of an item the user wishes to measure. The information is then
automatically sent to a cloud-based server where the dimensions are calculated through our proprietary algorithms, and the accurate
measurements (+ or - 2 centimeters) are then sent back to the user’s mobile device. We believe that the commercial applications
for this technology are significant in many areas.
Currently, we are focusing
on the following market segments:
|
●
|
E-commerce fashion/apparel industry – our main target-market;
|
While we are currently
devoting much of our focus on the applications for the e-commerce apparel industry, management believes that all of the above-mentioned
applications will be useful to users, retailers and vendors alike.
Results
of Operations
The table below provides our results
of operations for the periods indicated.
|
|
Three months ended
March 31
|
|
|
2019
|
|
2018
|
|
|
(dollars in thousands)
|
Revenues
|
|
$
|
20
|
|
|
$
|
—
|
|
Cost of revenues
|
|
|
(1
|
)
|
|
|
—
|
|
Gross profit
|
|
|
19
|
|
|
|
—
|
|
Research and development expenses
|
|
|
(292
|
)
|
|
|
(265
|
)
|
Marketing, general and administrative expenses
|
|
|
(990
|
)
|
|
|
(1,612
|
)
|
Operating loss
|
|
|
(1,263
|
)
|
|
|
(1,877
|
)
|
Financial income (expenses), net
|
|
|
(264
|
)
|
|
|
(3,546
|
)
|
Net loss
|
|
$
|
(1,527
|
)
|
|
$
|
(5,423
|
)
|
Three Months Ended March 31, 2019 Compared
to Three Months Ended March 31, 2018
Revenues
From inception through
December 31, 2018, we have not generated any revenue from operations and expect to incur additional losses to perform further
research and development activities. We started to generate revenues only in 2019. Our revenues for the three months ended March
31, 2019 amounted to $20,000 compared to none for the three months ended March 31, 2018. The increase between the corresponding
period primarily resulted from new pilot and license agreements.
Research
and Development Expenses
Our research and
development expenses for the three months ended March 31, 2019 amounted to $292,000 compared to $265,000 for the three months ended
March 31, 2018. The increase between the corresponding period primarily resulted from the hiring of new employees and expenses
associated with share-based payments to our employees.
Marketing,
General and Administrative Expenses
Our marketing,
general and administrative expenses for the three months ended March 31, 2019 amounted to $990,000 compared to $1,612,000 for
the three months ended March 31, 2018. The decrease compared to the corresponding period was mainly due to a reduction in
share-based payment expenses and professional services expenses which were offset by an increase in marketing expenses. For
the three months ended March 31, 2018, we had an expense of $83,000 in respect of share-based payments, compared to an
expense of $637,000 for the three months ended March 31, 2018.
Financial Expenses, Net
Our
financial expenses, net for the three months ended March 31, 2019 amounted to $264,000 compared to financial expenses, net of
$3,546,000 for the three months ended March 31, 2018. The decrease compared to the corresponding period was mainly due to
income of $87,000 for the three months ended March 31, 2019 from change in fair value of warrants as opposed to expenses of
$3,899,000 for the three months ended March 31, 2018.
Net
Loss
As a result of the
foregoing research and development, marketing general and administrative expenses, and financial expenses, our net loss for the
three months ended March 31, 2019 was $1,527,000, compared to net loss of $5,423,000 for the three months ended March 31, 2018.
The decrease in net loss is due to the reduction of share-based payment expenses, and professional services expenses, as well
as an increase in income from the revaluation of warrants, derivatives and stock based compensation liabilities as opposed to
expenses incurred in the corresponding period.
Liquidity
and Capital Resources
Since
our inception, we have funded our operations primarily through public and private offerings of debt and equity in the State of
Israel and in the U.S.
As
of March 31, 2019, we had cash, cash equivalents and restricted cash of $5,551,000 and no short term deposit compared
to $5,411,000 of cash, cash equivalents and restricted cash and $1,209,000 in a short term deposit as of December 31, 2018.
This decrease primarily resulted from our operating activities.
Cash
used in operating activities was $1,199,000 for the three months ended March 31, 2019, compared to $1,192,000 for the three months
ended March 31, 2018.
Net cash provided by
investing activities was $1,375,000 for the three months ended March 31, 2019, compared to cash used in investing activities of
$1,000 for the three months ended March 31, 2018. The net cash provided by investing activities for the three months ended March
31, 2019 was mainly due to the proceeds from short-term and restricted deposits in comparison to the purchase of property and equipment
during the three months ended March 31, 2018.
We had no cash flow
from financing activities for the three months ended March 31, 2019, compared to $8,994,000 for the three months ended March 31,
2018. The cash flow from financing activities for the nine months ended March 31, 2018 was due to a public offering of our securities
and proceeds from the exercise of the warrants.
We do not have any
material commitments for capital expenditures during the next twelve months. Based on our projected cash flows and the cash balances
as of the date of this Quarterly Report on Form 10-Q, we believe we have sufficient cash to fund our obligations for a period which
is longer than 12 months from the date of this Quarterly Report on Form 10-Q. However, in order to meet our business objectives
in the future, we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital
would be used to accomplish the following:
|
●
|
finance our current operating expenses;
|
|
●
|
pursue growth opportunities;
|
|
●
|
hire and retain qualified management and key employees;
|
|
●
|
respond to competitive pressures;
|
|
●
|
comply with regulatory requirements; and
|
|
●
|
maintain compliance with applicable laws.
|
Current conditions
in the capital markets are such that traditional sources of capital may not be available to us when needed or may be available
only on unfavorable terms. Our ability to raise additional capital, if needed, will depend on conditions in the capital markets,
economic conditions and a number of other factors, many of which are outside our control, and on our financial performance. Accordingly,
we cannot assure you that we will be able to successfully raise additional capital at all or on terms that are acceptable to us.
If we cannot raise additional capital when needed, it may have a material adverse effect on our business, results of operations
and financial condition.
To the extent that
we raise additional capital through the sale of equity or convertible debt securities, the issuance of such securities could result
in substantial dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may
be more favorable to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative
securities, which may have a further dilutive effect on the holders of any of our securities then-outstanding. We may issue additional
shares of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with
hiring or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capital-raising
or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance,
may cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the
terms of such financings. In addition, we may incur substantial costs in pursuing future capital financing, including investment
banking fees, legal fees, accounting fees, securities law compliance fees, printing and distribution expenses and other costs.
We may also be required to recognize non-cash expenses in connection with certain securities we issue, such as convertible notes
and warrants, which may adversely impact our financial condition. Furthermore, any additional debt or equity financing that we
may need may not be available on terms favorable to us, or at all. If we are unable to obtain such additional financing on a timely
basis, we may have to curtail our development activities and growth plans and/or be forced to sell assets, perhaps on unfavorable
terms, or we may have to cease our operations, which would have a material adverse effect on our business, results of operations
and financial condition.
Off-Balance
Sheet Arrangements
We
have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained
interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities
or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market
risk or credit risk support.
Application
of Critical Accounting Policies and Estimates
Our
management’s discussion and analysis of our financial condition and results of operations is based on our financial statements,
which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting
periods. Actual results may differ from these estimates under different assumptions or conditions.
While
our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this
report, we believe that the accounting policies discussed below are critical to our financial results and to the understanding
of our past and future performance, as these policies relate to the more significant areas involving management’s estimates
and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information
was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2)
changes in the estimate could have a material impact on our financial condition or results of operations.
Revenue from Contracts with Customers
We account for our revenue
from contracts with customers in our financial statements based on ASC 606.
To recognize revenue under
ASC 606, we apply the following five steps:
|
1.
|
Identify the contract with a customer. A contract with a
customer exists when the Company enters into an enforceable contract with a customer and the Company determines that collection
of substantially all consideration for the license and/or services is probable.
|
|
2.
|
Identify the performance obligations in the contract.
|
|
3.
|
Determine the transaction price. The transaction price is determined based on the
consideration to which the Company will be entitled in exchange for providing the service to the customer.
|
|
4.
|
Allocate the transaction price to performance obligations
in the contract. If a contract contains a single performance obligation, the entire transaction price is allocated to the single
performance obligation.
|
|
5.
|
Recognize revenue when or as the Company satisfies a performance
company provides a service, revenue is recognized over the service term.
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Research
and development expenses
Research
expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets
as of the date as of which it can be established that it is probable that future economic benefits attributable to the asset will
flow to us considering its commercial feasibility. This is generally the case when regulatory approval for commercialization is
achieved and costs can be measured reliably. Given the current stage of the development of our products, no development expenditures
have yet been capitalized. Intellectual property-related costs for patents are part of the expenditure for the research and development
projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project
concerned does not meet the criteria for capitalization.
Equity-based
compensation
We account for our
employees’ share-based compensation as an expense in the financial statements based on ASC 718. All awards are equity classified
and therefore the cost is measured at the grant date fair value of the award. We estimate share option grant date fair value using
the Binomial option pricing model.
We recorded stock
options issued to non-employees at fair value, remeasured to reflect the current fair value at each reporting period and
recognized expenses over the service period. We elected to early implement ASU 2018-07, Stock Compensation: Improvements to
Nonemployee Share-Based Payment Accounting, from October 1, 2018.
In
accordance with ASU 2018-07, we measured stock options at the implementation date and reclassified the share based payments from
a liability share based payments awards to equity share based payments awards. The fair value as of the implementation date will
be recognized over the remaining service period. We estimate share option grant date fair value using the Binomial option pricing
model.
The expected volatility
of the share price reflects the assumption that the historical volatility of the share price is reasonably indicative of expected
future trends.
The risk-free interest
rate for grants with exercise price denominated in NIS is based on the yield from Israel treasury zero-coupon bonds with an equivalent
term. The risk-free interest rate for grants with exercise price denominated in USD is based on the yield from US treasury zero-coupon
bonds with an equivalent term.
We have historically
not paid dividends and have no foreseeable plans to pay dividends.