Company Quick10K Filing
My Size
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$0.00 30 $20
10-Q 2019-11-14 Quarter: 2019-09-30
10-Q 2019-08-08 Quarter: 2019-06-30
10-Q 2019-05-13 Quarter: 2019-03-31
10-K 2019-03-27 Annual: 2018-12-31
10-Q 2018-11-19 Quarter: 2018-09-30
10-Q 2018-08-13 Quarter: 2018-06-30
10-Q 2018-05-11 Quarter: 2018-03-31
10-K 2018-03-21 Annual: 2017-12-31
10-Q 2017-11-13 Quarter: 2017-09-30
10-Q 2017-08-18 Quarter: 2017-06-30
10-Q 2017-05-16 Quarter: 2017-03-31
10-K 2017-04-14 Annual: 2016-12-31
10-Q 2016-11-21 Quarter: 2016-09-30
10-Q 2016-08-15 Quarter: 2016-06-30
10-Q 2016-05-23 Quarter: 2016-03-31
10-K 2016-03-04 Annual: 2015-12-31
10-Q 2015-11-16 Quarter: 2015-09-30
10-Q 2015-08-20 Quarter: 2015-06-30
10-Q 2012-05-17 Quarter: 2012-03-31
10-K 2012-03-30 Annual: 2011-12-31
10-Q 2011-11-21 Quarter: 2011-09-30
10-Q 2011-08-22 Quarter: 2011-06-30
10-Q 2011-06-10 Quarter: 2011-03-31
10-K 2011-04-14 Annual: 2010-12-31
10-Q 2010-11-15 Quarter: 2010-09-30
10-Q 2010-08-13 Quarter: 2010-06-30
10-Q 2010-05-24 Quarter: 2010-03-31
10-K 2010-03-23 Annual: 2009-12-31
8-K 2020-01-15 Enter Agreement, Sale of Shares, Other Events, Exhibits
8-K 2020-01-09 Regulation FD, Exhibits
8-K 2019-11-20 Other Events
8-K 2019-11-19
8-K 2019-11-15 Shareholder Rights, Amend Bylaw, Other Events, Exhibits
8-K 2019-11-14 Earnings, Exhibits
8-K 2019-10-01 Other Events
8-K 2019-09-13 Enter Agreement, Exhibits
8-K 2019-08-09 Earnings, Exhibits
8-K 2019-08-05 Shareholder Vote
8-K 2019-07-23
8-K 2019-06-02 Officers
8-K 2019-05-15 Earnings, Exhibits
8-K 2019-04-15 Officers
8-K 2019-03-28 Earnings, Exhibits
8-K 2019-02-08 Regulation FD, Other Events, Exhibits
8-K 2019-01-22
8-K 2018-12-04 Regulation FD, Exhibits
8-K 2018-10-10
8-K 2018-09-27 Other Events
8-K 2018-09-12
8-K 2018-09-06 Other Events, Exhibits
8-K 2018-08-07 Other Events, Exhibits
8-K 2018-07-03 Shareholder Vote
8-K 2018-04-18 Amend Bylaw, Exhibits
8-K 2018-03-05 Other Events
8-K 2018-03-05 Regulation FD, Exhibits
8-K 2018-02-15 Amend Bylaw, Exhibits
8-K 2018-02-12 Shareholder Vote
8-K 2018-02-06 Other Events, Exhibits
8-K 2018-01-31 Enter Agreement, Other Events, Exhibits
8-K 2018-01-25 Other Events, Exhibits
MYSZ 2019-09-30
Part I
Item 1. Financial Statements.
Note 1 - General
Note 2 - Significant Accounting Policies
Note 2 - Significant Accounting Policies (Cont'D)
Note 3 - Financial Instruments
Note 4 - Stock Based Compensation
Note 5 - Contingencies and Commitments
Note 6 - Significant Events During The Reporting Period
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
Item 4. Controls and Procedures.
Part II - Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures.
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 f10q0919ex31-1_mysizeinc.htm
EX-31.2 f10q0919ex31-2_mysizeinc.htm
EX-32.1 f10q0919ex32-1_mysizeinc.htm
EX-32.2 f10q0919ex32-2_mysizeinc.htm

My Size Earnings 2019-09-30

MYSZ 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Comparables ($MM TTM)
Ticker M Cap Assets Liab Rev G Profit Net Inc EBITDA EV G Margin EV/EBITDA ROA
ZDGE 39 10 2 9 8 -2 -1 37 85% -45.5 -24%
QUMU 37 27 24 25 18 -2 1 33 72% 49.3 -8%
MYSZ 20 5 2 0 0 -5 -5 16 96% -3.1 -104%
BVSN 7 6 3 4 3 -3 -3 3 67% -0.9 -55%
CPAH 7 12 9 10 8 -5 -5 6 80% -1.2 -41%
BLIN 6 13 10 10 4 -11 -11 5 44% -0.5 -84%
FSNN 0 634 770 400 190 -44 59 651 47% 11.0 -7%
SFET
NLOK
LINX

10-Q 1 f10q0919_mysizeinc.htm QUARTERLY REPORT

 

 

U. S. Securities and Exchange Commission

Washington, D. C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2019

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File No. 001-37370

 

MY SIZE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   51-0394637
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
I.D. No.)

 

HaYarden 4, POB 1026, Airport City, Israel, 7010000

(Address of principal executive offices)

 

+972-3-600-9030

Registrant’s telephone number, including area code:

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, $0.001 par value per share   MYSZ   Nasdaq Capital Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒   No ☐

 

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

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

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

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: as of November 10, 2019, 29,883,639 shares of common stock, par value $0.001 per share were issued and outstanding. 

 

 

 

 

 

 

MY SIZE, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2019

 

TABLE OF CONTENTS

 

    PAGE 
PART I - FINANCIAL INFORMATION 1
     
Item 1. Condensed Consolidated Interim Financial Statements (Unaudited) 1
  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 7
  Notes to Condensed Consolidated Interim Financial Statements 8
Item 2. Management’s Discussion & Analysis of Financial Condition and Results of Operations 14
Item 3. Quantitative and Qualitative Disclosure About Market Risk 23
Item 4. Controls and Procedures 23
   
PART II - OTHER INFORMATION 24
     
Item 1. Legal Proceedings 24
Item 1A. Risk Factors 24
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
Item 3. Defaults Upon Senior Securities 24
Item 4. Mine Safety Disclosures 24
Item 5 Other information 24
Item 6. Exhibits 25

 

 

 

 

 

PART I

FINANCIAL INFORMATION

 

Item 1. Financial Statements.

 

My Size Inc. and Subsidiaries

 

Condensed Consolidated

Interim

Financial Statements

As of September 30, 2019

(unaudited)

U.S. Dollars in Thousands

 

1

 

 

MY SIZE, INC. AND ITS SUBSIDIARIES

 

Condensed Consolidated Interim Financial Statements as of September 30, 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   5-6
     
Condensed Consolidated Interim Statements of Cash flows   7
     
Notes to Condensed Consolidated Interim Financial Statements   8-13

 

2

 

 

MY SIZE, INC. AND ITS SUBSIDIARIES

 

Condensed Consolidated Interim Balance Sheets

U.S. dollars in thousands (except share data and per share data)

 

      September 30,   December 31, 
      2019   2018 
      (Unaudited)   (Audited) 
Assets           
Current Assets:           
Cash and cash equivalents      2,561    5,140 
Restricted cash      262    90 
Restricted deposit      -    181 
Short-term deposit      -    1,209 
Other receivables and prepaid expenses      431    218 
Total current assets      3,254    6,838 
              
Property and equipment, net      76    71 
Right of use assets  2d   30    - 
Investment in marketable securities      74    208 
       180    279 
              
Total assets      3,434    7,117 
              
Liabilities and stockholders’ equity             
              
Current liabilities:             
Trade payables      488    295 
Accounts payable      306    276 
Warrants and derivatives      700    1,252 
Operating lease liabilities  2d   17    - 
Total current liabilities      1,511    1,823 
              
Operating lease liabilities  2d   13    - 
Total non-current liabilities      13    - 
              
Total liabilities      1,524    1,823 
              
COMMITMENTS AND CONTINGENCIES             
              
Stockholders’ equity:             
Stock Capital -             
Common stock of $ 0.001 par value - Authorized: 100,000,000 shares;
Issued and outstanding: 29,883,639 and 29,852,389 as of September 30, 2019 and December 31, 2018, respectively
      30    30 
Additional paid-in capital      29,683    29,116 
Accumulated other comprehensive loss      (543)   (835)
Accumulated deficit      (27,260)   (23,017)
Total stockholders’ equity      1,910    5,294 
Total liabilities and stockholders’ equity      3,434    7,117 

 

The accompanying notes are an integral part of the condensed consolidated financial statements.

 

3

 

 

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)

 

   Nine-Months Ended
September 30,
   Three-Months Ended
September 30,
 
   2019   2018   2019   2018 
   (Unaudited)   (Unaudited)   (Unaudited)   (Unaudited) 
                 
Revenues   31    -    6    - 
Cost of revenues   (1)   -    -    - 
Gross profit   30    -    6    - 
                     
Operating expenses                    
Research and development   (1,066)   (807)   (395)   (311)
Marketing, general and administrative   (3,389)   (3,103)   (1,210)   (771)
                     
Total operating expenses   (4,455)   (3,910)   (1,605)   (1,082)
Operating loss   (4,425)   (3,910)   (1,599)   (1,082)
Financial income (expenses), net   182    (1,483)   249    (479)
Net loss   (4,243)   (5,393)   (1,350)   (1,561)
                     
Other comprehensive income (loss):                    
                     
Foreign currency translation differences   292    (477)   58    31 
                     
Total comprehensive loss   (3,951)   (5,870)   (1,292)   (1,530)
                     
Basic and diluted loss per share   (0.14)   (0.19)   (0.05)   (0.05)
Basic and diluted weighted average number of shares outstanding   29,872,879    28,870,135    29,883,639    29,709,009 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements

 

4

 

 

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 and per share data)

 

   Common stock   Additional paid-in   Accumulated
other
comprehensive
   Accumulated   Total
stockholders’
 
   Number   Amount   capital   loss   deficit   equity 
                     
Balance as of January 1, 2019   29,852,389    30    29,116    (835)   (23,017)   5,294 
                               
Stock-based compensation related to options granted to employees and consultants   -    -    519    -    -    519 
Issuance of shares to consultants   31,250    (*)   48    -    -    48 
Total comprehensive loss   -    -    -    292    (4,243)   (3,951)
Balance as of September 30, 2019   29,883,639    30    29,683    (543)   (27,260)   1,910 

 

(*)Represents an amount less than $1

 

   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   -    -    110    -    -    110 
Issuance of shares to consultants   312,400    1    320    -    -    321 
Total comprehensive loss   -    -    -    (477)   (5,393)   (5,870)
Exercise of warrants and options   3,846,515    4    8,644    -    -    8,648 
Liability reclassified to equity   82,368    (*)   104    -    -    104 
Issuance and receipts on account of shares, net of issuance cost of $351   3,230,000    3    3,544    -    -    3,547 
Balance as of September 30, 2018   29,710,028    30    28,730    (611)   (22,441)   5,708 

 

(*)Represents an amount less than $1.

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements

 

5

 

 

MY SIZE, INC. AND ITS SUBSIDIARIES

 

Condensed Consolidated Interim Statements of Changes in Stockholders’ Equity

U.S. dollars in thousands (except share data and per share data)

 

   Common stock   Additional paid-in   Accumulated
other
comprehensive
   Accumulated   Total
stockholders’
 
   Number   Amount   capital   loss   deficit   equity 
                         
Balance as of July 1, 2019   29,883,639    30    29,538    (601)   (25,910)   3,057 
                               
Stock-based compensation related to options granted to employees and consultants   -    -    145    -    -    145 
Total comprehensive loss   -    -    -    58    (1,350)   (1,292)
Balance as of September 30, 2019   29,883,639    30    29,683    (543)   (27,260)   1,910 

 

(*)Represents an amount less than $1.

 

   Common stock   Additional paid-in   Accumulated
other
comprehensive
   Accumulated   Total
stockholders’
 
   Number   Amount   capital   loss   deficit   equity 
                         
Balance as of July 1, 2018   29,678,778    30    28,430    (642)   (20,880)   6,938 
                               
Stock-based compensation related to employees   -    -    4    -    -    4 
Issuance of shares to consultants   31,250    (*)   106    -    -    106 
Total comprehensive loss   -    -    -    31    (1,561)   (1,530)
Exercise of warrants and options   -    -    190    -    -    190 
Balance as of September 30, 2018   29,710,028    30    28,730    (611)   (22,441)   5,708 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements

 

(*)Represents an amount less than $1.

 

6

 

 

MY SIZE, INC. AND ITS SUBSIDIARIES

 

Condensed Consolidated Interim Statements of Cash Flows

U.S. dollars in thousands

  

   Nine-Months Ended
September 30,
 
   2019   2018 
   (Unaudited)   (Unaudited) 
Cash flows from operating activities:        
Net loss   (4,243)   (5,393)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   21    24 
Revaluation of warrants, derivatives, stock-based compensation liabilities and convertible loan   (629)   2,299 
Interest and revaluation of short-term deposit   55    (8)
Interest received from short-term deposit   16    - 
Interest payment of short-term loan   -    (192)
Revaluation of investment in marketable securities   146    (338)
Stock based compensation- equity   567    431 
Stock based compensation- liability   -    475 
Change in embedded derivative and warrants   -    (59)
Decrease (increase) in other receivables and prepaid expenses   (188)   8 
Increase in trade payable   165    13 
Increase (decrease) in accounts payable   8    (58)
           
Net cash used in operating activities   (4,082)   (2,798)
           
Cash flows from investing activities:          
           
Proceeds from restricted deposits   181    - 
Proceeds from (investment in) short-term deposits   1,200    (2,380)
Purchase of property and equipment   (21)   (24)
           
Net cash provided by (used in) investing activities   1,360    (2,404)
           
Cash flows from financing activities:          
Proceeds from exercise of warrants and options   -    3,945 
Proceeds from issuance of shares, warrants, short term loan and convertible loan   -    5,923 
Repayment of short term loan, net   -    (555)
           
Net cash provided by financing activities   -    9,313 
           
Effect of exchange rate fluctuations on cash and cash equivalents   315    (500)
           
Increase (decrease) in cash, cash equivalents and restricted cash   (2,407)   3,611 
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   2,823    5,483 
           
Non cash transactions:          
Exercise of warrants and share based compensation to equity   -    4,703 
Derivative liability reclassified to equity   -    104 

 

The accompanying notes are an integral part of the interim condensed consolidated financial statements.

 

7

 

 

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 nine month period ended September 30, 2019, the Company has incurred significant losses and negative cash flows from operations and has an accumulated deficit of $27,260. The Company has financed its operations mainly through fundraising from various investors.

 

The Company’s management expects that the Company will continue to generate losses and negative cash flows from operations for the foreseeable future. Based on the projected cash flows and cash balances as of September 30, 2019, management is of the opinion that its existing cash will be sufficient to fund operations until the end of the first quarter of 2020. As a result, there is substantial doubt about the Company’s ability to continue as a going concern.

 

Management’s plans include the continued commercialization of the Company’s products and securing sufficient financing through the sale of additional equity securities, debt or capital inflows from strategic partnerships. Additional funds may not be available when the Company needs them, on terms that are acceptable to it, or at all. If the Company is unsuccessful in commercializing its products and securing sufficient financing, it may need to cease operations.

 

The financial statements include no adjustments for measurement or presentation of assets and liabilities, which may be required should the Company fail to operate as a going concern.

  

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 nine months ended September 30, 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 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.

 

b.Use of estimates:

 

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.

 

8

 

 

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 nine months ended September 30, 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 requires 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 an office space lease agreement and three-year cancelable operating lease agreements on behalf of personnel vehicles. 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 of right of use assets and operating lease liabilities at January 1, 2019. As of September 30, 2019, the total of right-of-use assets related to the Company’s operating leases was $30 and operating lease liabilities and operating lease liabilities non-current were approximately $17 and $13, respectively.

 

9

 

 

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 ASC 820 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, 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.

 

   September 30, 2019 
   Fair value hierarchy 
   Level 1   Level 2   Level 3 
Financial assets            
                
Investment in marketable securities (*)          -          74           - 
                
   September 30, 2019 
   Fair value hierarchy 
   Level 1   Level 2   Level 3 
Financial liabilities            
             
Warrants and derivatives          -         700           - 

 

10

 

 

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.)

 

   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 and derivatives   -    1,252    - 

 

(*)For the nine and three month periods ended September 30, 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 $(146), $(42) and $338, $(87), respectively.

 

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:

 

   Nine months ended
September 30,
   Three months ended
September 30,
 
   2019   2018   2019   2018 
                 
Stock-based compensation expense - equity awards   567    431    145    110 
Stock-based compensation expense - liability awards   -    475    -    25 
                     
    567    906    145    135 

 

11

 

 

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 (Cont.)

 

Options 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 said agreement and in partial consideration for such consulting services, the Company agreed to issue to 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 nine and three month period ended September 30, 2019, amounts of $42 and $4, respectively, were recorded by the Company as stock-based equity awards with respect to Consultant12.

 

In April 2019, the Company entered into a twelve month agreement with a consultant (“Consultant13”) to provide services to the Company including assisting the Company to promote, market and sell the Company’s technology to potential customers. Pursuant to said agreement and in partial consideration for such consulting services, the Company agreed to issue to Consultant13 options to purchase up to 40,000 shares of the Company’s common stock upon execution of the agreement. The options are exercisable at $1.00 per share and shall vest in 4 equal installments every three months starting July 2019. Unexercised options shall expire 2 years from the effective date. 

 

During the nine and three month period ended September 30, 2019, an amount of $6 and $3, was recorded by the Company as stock-based equity awards with respect to Consultant13.

 

In July 2019, the Company entered into a three year agreement with a consultant (“Consultant14”) to provide services to the Company including assisting the Company to promote, market and sell the Company’s technology to potential customers. Pursuant to such agreement and in partial consideration for such consulting services, the Company agreed to issue to Consultant14 options to purchase up to 40,000 shares of the Company’s common stock upon execution of the agreement. The options are exercisable at $1.00 per share and shall vest in 3 equal installments every twelve months starting June 2020. Unexercised options shall expire 4 years from the effective date. 

 

During the nine and three month period ended September 30, 2019, an amount of $1 was recorded by the Company as stock-based equity awards with respect to Consultant14.

 

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 grant date.

 

During the nine month period ended September 30, 2019, 1,553,950 options were granted, no options were exercised and 60,000 options expired.

 

The total stock option compensation expense during the nine and three month period ended September 30, 2019 which were recorded as research and development was $125 and $34, respectively.

 

The total stock option compensation expense during the nine and three month period ended September 30, 2019 which was recorded as marketing and general and administrative expenses was $307 and $90, respectively.

 

12

 

 

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 now former 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 now former Chairman of the Board filed a motion to dismiss North Empire’s third-party complaint. The parties are now engaging in discovery in connection with the claims and counterclaims, and are awaiting the court’s decision on the motion to dismiss North Empire’s third-party complaint.

 

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 the 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.

 

The Company did not regain compliance with the Rule by July 22, 2019 and, as a result, on July 23, 2019, the Company received notice from the Staff that, based upon the Company’s continued non-compliance with the Rule, the Staff had determined to delist the Company’s common stock from Nasdaq unless the Company timely requests a hearing before the Nasdaq Hearings Panel (the “Panel”). The hearing occurred on September 19, 2019.

 

On October 1, 2019, the Panel granted the Company’s request for continued listing of the Company’s common stock on the Nasdaq Capital Market pursuant to an extension through January 20, 2020, subject to the condition that the Company regain compliance with the Bid Price Rule by such date and that the Company demonstrate compliance with all requirements for continued listing on the Nasdaq. Previously, on August 5, 2019, at the annual meeting of the Company’s stockholders, discretionary authority was granted to the Company’s board of directors to effect a reverse stock split at any time until August 5, 2020 at a ratio within the range from 1-for-2 up to 1-for-30. The Company plans to effect a reverse stock split to regain compliance with the Bid Price Rule. If the Company does not regain compliance with the Bid Price Rule by January 20, 2020 or it is unable to demonstrate compliance with all requirements for continued listing on the Nasdaq, or, based on any significant events that occur during the extension period, the Panel reconsiders the extension, Nasdaq would delist the Company’s common stock from the Nasdaq Capital Market.

     
  c.

In August 2019, the Company entered into an office space lease agreement. The lease term is for 36 months beginning on August 20, 2019 and ending on August 20, 2022, with an option to extend for an additional 36 months. Monthly rent payments including utilities amount to approximately NIS 35,000 per month.

 

As at September 30, 2019, the Company had not moved into its new office space.

 

Note 6 - Significant Events During the Reporting Period

 

a.

On September 13, 2019, the Company entered into an At The Market Offering Agreement (the “Offering Agreement”) with H.C. Wainwright & Co., LLC, as sales agent (“H.C. Wainwright”), pursuant to which the Company may offer and sell, from time to time through H.C. Wainwright shares of the Company’s common stock, par value $0.001 per share, having an aggregate offering price of up to $5,500,000 (the “Shares”). Pursuant to the Offering Agreement, H.C. Wainwright may sell the Shares by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415 of the Securities Act. The Company is not obligated to make any sales of the Shares under the Offering Agreement. The offering of Shares pursuant to the Offering Agreement will terminate upon the earliest of (a) the sale of all of the Shares subject to the Offering Agreement, (b) the termination of the Offering Agreement by H.C. Wainwright or the Company, as permitted therein, or (c) September 13, 2022

   
b.

During the three months ended September 30, 2019, the Company began an examination of changing its functional currency from New Israeli Shekels to U.S. dollars.

 

13

 

 

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;

 

  our ability to continue as a going concern;

 

  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;

 

 

 

the impact of the political and security situation in Israel on our business; and

 

our ability to remain listed on the Nasdaq Capital Market.

 

14

 

 

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.

 

15

 

 

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;

 

  Shipping/parcel; and

 

  DIY uses.

 

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.

 

We are in the commercialization phase of our products although have only generated minimal revenues to date. In recent months, Isay, a Danish fashion brand, selected MySizeID as a measuring solution, we announced the planned launch of MySizeID in Australia with a global retail marketplace operator that is set to introduce an integrated, technology-based app for the custom apparel and merchandise industry, we entered into a license agreement for MySizeID with Penti, a leading multi-category retail fashion underwear brand, we successfully integrated and launched the MySizeID smart measurement solution software development kit (SDK) for DeMoulin, a music performance group apparel company, and we are proceeding with the global integration of MySizeID into the e-commerce platform of one of the largest apparel companies in the world, which has since been expanded worldwide. In addition, we have also executed agreements with a number of additional retailers either directly or through our recently announced collaboration with Shopify and Lightspeed. We also recently announced that BoxSize has been approved for Honeywell’s global vendor program and are continuing to make progress with Katz Corporation, one of the largest package delivery companies in Israel, as they have started rolling out BoxSize within the organization.

 

While we rollout our products to major retailers and apparel companies, there is a lead time for new customers to ramp up before we can recognize revenue. This lead time varies between customers, especially when the customer is a tier 1 retailer, where the integration process may take longer. Generally, first we integrate our product into a customer’s online platform, which is followed by piloting and implementation, and, assuming we are successful, commercial roll-out, all of which takes time before we expect it to impact our financial results in a meaningful way. While we have begun generating initial sales revenue, we do not expect to generate meaningful revenue during the upcoming quarters. Because of the numerous risks and uncertainties associated with the success of our market penetration and our dependence on the extent to which MySizeID is adopted and utilized, we are unable to predict the extent to which we will recognize revenue. We may be unable to successfully develop or market any of our current or proposed products or technologies, those products or technologies may not generate any revenues, and any revenues generated may not be sufficient for us to become profitable or thereafter maintain profitability.

 

16

 

 

Results of Operations

 

The table below provides our results of operations for the periods indicated.

 

   Three months ended
September
   Nine months ended
September
 
   2019   2018   2019   2018 
   (dollars in thousands)   (dollars in thousands) 
Revenues   6    -   $31   $ 
Cost of revenues   -    -    (1)    
Gross profit   6    -    30     
Research and development expenses   (395)   (311)   (1,066)   (807)
Marketing, general and administrative expenses   (1,210)   (771)   (3,389)   (3,103)
Operating loss   (1,599)   (1,082)   (4,425)   (3,910)
Financial income (expenses), net   249    (479)   182    (1,483)
Net loss   (1,350)   (1,561)  $(4,243)  $(5,393)

 

Nine and three Months Ended September 30, 2019 Compared to Nine and three Months Ended September 30, 2018

 

Revenues

 

From inception through December 31, 2018, we did not generate any revenue from operations and we continue to expect to incur additional losses to perform further research and development activities. We started to generate revenues only in 2019. Our revenues for the nine months ended September 30, 2019 amounted to $31,000 compared to none for the nine months ended September 30, 2018. The increase from the corresponding period primarily resulted from pilot and license agreements. Our revenues for the three months ended September 30, 2019 amounted to $6,000 compared to none for the three months ended September 30, 2018. The increase from the corresponding period primarily resulted from a new license agreement.

 

17

 

 

Research and Development Expenses

 

Our research and development expenses for the nine months ended September 30, 2019 amounted to $1,066,000 compared to $807,000 for the nine months ended September 30, 2018. The increase from the corresponding period primarily resulted from the hiring of new employees and expenses associated with share-based payments to our employees offset by a decrease in payments to subcontractors.

 

Our research and development expenses for the three months ended September 30, 2019 amounted to $395,000 compared to $311,000 for the three months ended September 30, 2018. The increase from the corresponding period primarily resulted from the hiring of new employees and expenses associated with share-based payments to our employees offset by a decrease in payments to subcontractors.

 

Marketing, General and Administrative Expenses

 

Our marketing, general and administrative expenses for the nine months ended September 30, 2019 amounted to $3,389,000 compared to $3,103,000 for the nine months ended September 30, 2018. The increase in comparison with the corresponding period was mainly due to an increase in payroll expenses due to the hiring of a sales team in the US and an increase in sales and marketing expenses which were offset by a reduction in share-based payment expenses of consultants and employees and professional services expenses. For the nine months ended September 30, 2019, we had an expense of $417,000 in respect of share-based payments, in comparison with an expense of $872,000 in respect of share-based payments for the nine months ended September 30, 2018.

 

Our marketing, general and administrative expenses for the three months ended September 30, 2019 amounted to $1,210,000 compared to $771,000 for the three months ended September 30, 2018. The increase in comparison with the corresponding period was mainly due to an increase in insurance expenses and payroll expenses due to the hiring of a sales team in the US and an increase in sales and marketing expenses.

 

18

 

 

Financial Expenses, Net

 

Our financial income, net for the nine months ended September 30, 2019 amounted to $182,000 compared to financial expenses, net of $1,483,000 for the nine months ended September 30, 2018. The decrease in comparison with the corresponding period was mainly due to income of $619,000 for the nine months ended September 30, 2019 from change in fair value of warrants as opposed to expenses of $2,264,000 for the nine months ended September 30, 2018 offset by an expense of $143,000 for the nine months ended September 30, 2019 from revaluation investment in marketable securities as opposed to an income of $338,000 for the nine months ended September 30, 2018.

 

Our financial income, net for the three months ended September 30, 2019 amounted to $249,000 compared to financial expenses, net of $479,000 for the three months ended September 30, 2018. The decrease compared to the corresponding period was mainly due to income of $359,000 for the three months ended September 30, 2019 from change in fair value of warrants compared to an expense of $339,000 for the three months ended September 30, 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 nine months ended September 30, 2019 was $4,243,000, compared to net loss of $5,393,000 for the nine months ended September 30, 2018. The decrease in net loss is due to the reduction of share-based payment expenses and professional services expenses, and income from the revaluation of warrants, derivatives and stock based compensation liabilities, which is offset by an increase in payroll expenses due to the hiring of a sales team in the US and an overall increase in sales and marketing expenses.

 

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 September 30, 2019 was $1,350,000, compared to net loss of $1,561,000 for the three months ended September 30, 2018. The decrease in net loss is due to the increase in income from the revaluation of warrants and stock based compensation liabilities offset by an increase of sales and marketing expenses.

 

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 September 30, 2019, we had cash, cash equivalents and restricted cash of $2,823,000 and no short term deposit compared to $5,230,000 of cash, cash equivalents and restricted cash, $181,000 in a short-term restricted deposit and $1,209,000 in a short-term deposit as of December 31, 2018. This decrease primarily resulted from our operating activities.

 

On September 13, 2019, we entered into an At The Market Offering Agreement with H.C. Wainwright & Co., LLC, as agent (“H.C. Wainwright”), pursuant to which we may sell from time to time, at our option, up to $5.5 million of our shares of common stock through an “at-the-market” equity offering program under which H.C. Wainwright will act as sales agent. The issuance and sale of shares of common stock by us under the program will be made pursuant to our effective “shelf” registration statement on Form S-3 (Registration Statement No. 333-222535) filed with the SEC on January 1, 2018, and declared effective on January 25, 2018. No shares of common stock have been sold under the program.

 

Cash used in operating activities was $4,082,000 for the nine months ended September 30, 2019, compared to $2,798,000 for the nine months ended September 30, 2018.

 

Net cash provided by investing activities was $1,360,000 for the nine months ended September 30, 2019, compared to cash used in investing activities of $2,404,000 for the nine months ended September 30, 2018. The net cash provided by investing activities for the nine months ended September 30, 2019 was mainly due to the proceeds from short-term and restricted deposits in comparison to the cash used to invest in short-term deposits during the nine months ended September 30, 2018.

 

We had no cash flow from financing activities for the nine months ended September 30, 2019, compared to $9,313,000 for the nine months ended September 30, 2018. The cash flow from financing activities for the nine months ended September 30, 2018 was due to a public offering of our securities and proceeds from the exercise of the warrants.

 

19

 

 

We do not have any material commitments for capital expenditures during the next twelve months.

 

We expect to continue to generate losses and negative cash flows from operations for the foreseeable future. Based on the projected cash flows and cash balances as of September 30, 2019, management is of the opinion that our existing cash will be sufficient to fund operations until the end of the first quarter 2020 without further fund raising. As a result, there is substantial doubt about the Company’s ability to continue as a going concern. Management’s plans include the continued commercialization of our products and securing sufficient financing through the sale of additional equity securities, debt or capital inflows from strategic partnerships. 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 and exchange rules.

 

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.

 

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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.

 

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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.

 

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 non-employee 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.

 

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Item 3. Quantitative and Qualitative Disclosure About Market Risk.

 

Not required for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2019. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, 2019 were effective.

 

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. 

 

Changes in Internal Controls

 

During the most recent fiscal quarter, in connection with the new contracts with customers, we designed controls for the order to cash process to identify and recognize revenue and implemented internal controls for the prevention of errors in financial reporting of revenue from contracts with customers.

 

Other than as described above, there were no other changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

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Part II – Other Information

 

Item 1. Legal Proceedings.

  

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

On August 7, 2018, we commenced an action against North Empire LLC, or 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 we are 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 us, 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 us against them, alleging that we 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 our CEO and now former Chairman of the Board asserting similar claims against them in their individual capacities. On October 17, 2018, we filed a reply to North Empire’s counterclaims. On November 15, 2018, our CEO and now former Chairman of the Board filed a motion to dismiss North Empire’s third-party complaint. The parties are now engaging in discovery in connection with the claims and counterclaims, and are awaiting the Court’s decision on the motion to dismiss North Empire’s third-party complaint. We intend to vigorously defend any claims made by North Empire. 

 

Item 1A. Risk Factors.

 

Not required for a smaller reporting company.

 

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

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

 

Item 5. Other Information.

 

None.

 

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Item 6. Exhibits.

 

Exhibit Number   Description of Exhibits
31.1*   Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*   Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*   Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*   Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS*   XBRL Instance Document
101.SCH*   XBRL Taxonomy Schema
101.CAL*   XBRL Taxonomy Calculation Linkbase
101.DEF*   XBRL Taxonomy Definition Linkbase
101.LAB*   XBRL Taxonomy Label Linkbase
101.PRE*   XBRL Taxonomy Presentation Linkbase

 

*Filed herewith

 

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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.

 

  My Size, Inc.
   
Date: November 14, 2019 By: /s/ Ronen Luzon
    Ronen Luzon
   

Chief Executive Officer

(Principal Executive Officer)

 

Date: November 14, 2019 By: /s/ Or Kles
    Or Kles
   

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

 

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