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 SeptemberJune 30, 20172021
☐ 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.) |
3 Arava St.HaYarden 4, pobPOB 1026, Airport City, Israel, 7010000
(Address of principal executive offices)
+972-3-600-9030972-3-600-9030
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.) 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 ☒
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 18,394,817 as of August 11, 2021, shares of common stock, par value $0.001 as of November 12, 2017.per share were issued and outstanding.
MY SIZE, INC.
INDEX TO QUARTERLY REPORT ON FORM 10-Q FILING
FOR THE THREE MONTHSQUARTER ENDED SEPTEMBERJune 30, 20172021
TABLE OF CONTENTS
| i |
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
My Size Inc. and Subsidiaries
Condensed Consolidated Interim
Interim
Financial Statements
As of SeptemberJune 30, 20172021
(unaudited)
U.S. Dollars in Thousands
| 1 |
My Size, Inc.MY SIZE, INC. AND ITS SUBSIDIARIES
Condensed Consolidated Interim Financial Statements as of SeptemberJune 30, 20172021 (Unaudited)
Contents
| 2 |
My Size, Inc.MY SIZE, INC. AND ITS SUBSIDIARIES
Condensed Consolidated Interim Balance Sheets
U.S. dollars in thousands (except share data and per share data)
| June 30, | December 31, | |||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | 4,824 | 1,689 | ||||||
| Restricted cash | �� | 269 | 85 | |||||
| Restricted deposit | - | 184 | ||||||
| Accounts receivable | 35 | 28 | ||||||
| Other receivables and prepaid expenses | 202 | 482 | ||||||
| Total current assets | 5,330 | 2,468 | ||||||
| Property and equipment, net | 117 | 128 | ||||||
| Right-of-use asset | 829 | 911 | ||||||
| Investment in marketable securities | 81 | 59 | ||||||
| Total non-current assets | 1,027 | 1,098 | ||||||
| Total assets | 6,357 | 3,566 | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities: | ||||||||
| Operating lease liability | 130 | 129 | ||||||
| Trade payables | 330 | 381 | ||||||
| Accounts payable | 429 | 400 | ||||||
| Derivatives | 2 | 1 | ||||||
| Total current liabilities | 891 | 911 | ||||||
| Operating lease liability | 521 | 579 | ||||||
| Total non-current liabilities | 521 | 579 | ||||||
| Total liabilities | 1,412 | 1,490 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Stockholders’ equity: | ||||||||
| Stock Capital - | ||||||||
| Common stock of $ par value - Authorized: shares; Issued and outstanding: and as of June 30, 2021 and December 31, 2020, respectively | 15 | 7 | ||||||
| Additional paid-in capital | 45,838 | 37,164 | ||||||
| Accumulated other comprehensive loss | (440 | ) | (424 | ) | ||||
| Accumulated deficit | (40,468 | ) | (34,671 | ) | ||||
| Total stockholders’ equity | 4,945 | 2,076 | ||||||
| Total liabilities and stockholders’ equity | 6,357 | 3,566 | ||||||
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (Unaudited) | (Audited) | |||||||
| $ thousands | $ thousands | |||||||
| Assets | ||||||||
| Current Assets: | ||||||||
| Cash and cash equivalents | 14 | 34 | ||||||
| Other receivables and prepaid expenses | 304 | 1,401 | ||||||
| Restricted cash | 69 | 62 | ||||||
| Total current assets | 387 | 1,497 | ||||||
| Investment in marketable securities | 246 | 579 | ||||||
| Property and equipment, net | 67 | 74 | ||||||
| 313 | 653 | |||||||
| Total assets | 700 | 2,150 | ||||||
| Liabilities and stockholders’ equity | ||||||||
| Current liabilities | ||||||||
| Trade payable | 315 | 229 | ||||||
| Accounts payable | 442 | 316 | ||||||
| Warrants, Derivative and share based liabilities | 435 | 80 | ||||||
| Total current liabilities | 1,192 | 625 | ||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Stockholders’ equity (Deficit): | ||||||||
| Capital stock - | ||||||||
| Common stock of $ 0.001 par value - Authorized: 50,000,000 shares; Issued and outstanding: 18,078,218 and 17,405,359 As of September 30, 2017 and December 31, 2016, respectively | 18 | 17 | ||||||
| Additional paid-in capital | 14,740 | 13,347 | ||||||
| Available for sale reserve | - | (93 | ) | |||||
| Accumulated other comprehensive loss | (87 | ) | (102 | ) | ||||
| Accumulated deficit | (15,163 | ) | (11,644 | ) | ||||
| Total stockholders’ equity (Deficit) | (492 | ) | 1,525 | |||||
| Total liabilities and stockholders’ equity | 700 | 2,150 | ||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
| 3 |
My Size, Inc.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)
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
Six-Months Ended June 30, | Three-Months Ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (Unaudited) | (Unaudited) | Unaudited) | (Unaudited) | |||||||||||||
| Revenues | 57 | 51 | 30 | 21 | ||||||||||||
| Cost of revenues | - | (1 | ) | - | - | |||||||||||
| Gross profit | 57 | 50 | 30 | 21 | ||||||||||||
| Operating expenses | ||||||||||||||||
| Research and development | (3,380 | ) | (688 | ) | (3,007 | ) | (340 | ) | ||||||||
| Sales and marketing | (1,277 | ) | (1,077 | ) | (731 | ) | (452 | ) | ||||||||
| General and administrative | (1,229 | ) | (1,078 | ) | (605 | ) | (562 | ) | ||||||||
| Total operating expenses | (5,886 | ) | (2,843 | ) | (4,343 | ) | (1,354 | ) | ||||||||
| Operating loss | (5,829 | ) | (2,793 | ) | (4,313 | ) | (1,333 | ) | ||||||||
| Financial income (expenses), net | 32 | 30 | (27 | ) | 29 | |||||||||||
| Net loss | (5,797 | ) | (2,763 | ) | (4,340 | ) | (1,304 | ) | ||||||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign currency translation differences | (16 | ) | 3 | 22 | 4 | |||||||||||
| Total comprehensive loss | (5,813 | ) | (2,760 | ) | (4,318 | ) | (1,300 | ) | ||||||||
| Basic and diluted loss per share | (0.51 | ) | (0.72 | ) | (0.33 | ) | (0.25 | ) | ||||||||
| Basic and diluted weighted average number of shares outstanding | 11,276,238 | 3,835,651 | 13,340,164 | 5,166,772 | ||||||||||||
| Nine-Months Ended September 30, | Three-Months Ended September 30, | Year ended December 31, | ||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2016 | ||||||||||||||||
$ thousands (Unaudited) | $ thousands (Unaudited) | $ thousands (Unaudited) | $ thousands (Unaudited) | $ thousands (Audited) | ||||||||||||||||
| Operating expenses | ||||||||||||||||||||
| Research and development | 624 | 500 | 213 | 172 | 727 | |||||||||||||||
| Marketing, General and administrative | 2,667 | 1,359 | 611 | 434 | 1,859 | |||||||||||||||
| Total operating expenses | 3,291 | 1,859 | 824 | 606 | 2,586 | |||||||||||||||
| Operating loss | (3,291 | ) | (1,859 | ) | (824 | ) | (606 | ) | (2,586 | ) | ||||||||||
| Financial (expenses) income, net | (228 | ) | (2,261 | ) | 17 | (118 | ) | (1,748 | ) | |||||||||||
| Net loss from continuing operations | (3,519 | ) | (4,120 | ) | (807 | ) | (724 | ) | (4,334 | ) | ||||||||||
| Other comprehensive loss: | ||||||||||||||||||||
| Gain (loss) on available for sale securities | 93 | 67 | 67 | (527 | ) | (24 | ) | |||||||||||||
| Foreign currency translation differences | 15 | (49 | ) | 16 | 35 | 2 | ||||||||||||||
| Total comprehensive loss | (3,411 | ) | (4,102 | ) | (724 | ) | (1,216 | ) | (4,356 | ) | ||||||||||
| Basic and diluted loss per share | (0.19 | ) | (0.26 | ) | (0.04 | ) | (0.04 | ) | (0.27 | ) | ||||||||||
| Basic and diluted weighted average number of shares outstanding | 17,599,340 | 15,741,967 | 17,625,440 | 16,584,354 | 16,345,499 | |||||||||||||||
The accompanying notes are an integral part of the interim condensed consolidated interim financial statements.statements
| 4 |
My Size, Inc.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)
| Number | Amount | capital | loss | deficit | equity | |||||||||||||||||||
| Common stock | Additional paid-in | Accumulated other comprehensive | Accumulated | Total stockholders’ | ||||||||||||||||||||
| Number | Amount | capital | loss | deficit | equity | |||||||||||||||||||
| Balance as of January 1, 2021 | 7,232,836 | 7 | 37,164 | (424 | ) | (34,671 | ) | 2,076 | ||||||||||||||||
| Stock-based compensation related to options granted to employees and consultants | - | - | 232 | - | - | 232 | ||||||||||||||||||
| Restricted shares issued to shareholder (*) | 2,500,000 | 3 | 2,615 | - | - | 2,618 | ||||||||||||||||||
| Issuance of shares, net of issuance cost of $768 | 4,580,491 | 4 | 5,031 | - | - | 5,035 | ||||||||||||||||||
| Exercise of warrants | 725,000 | 1 | 796 | - | - | 797 | ||||||||||||||||||
| Exercise of warrants and pre funded warrants | ||||||||||||||||||||||||
| Exercise of warrants and pre funded warrants, shares | ||||||||||||||||||||||||
| Liability reclassified to equity | ||||||||||||||||||||||||
| Total comprehensive loss | - | - | - | (16 | ) | (5,797 | ) | (5,813 | ) | |||||||||||||||
| Balance as of June 30, 2021 | 15,038,327 | 15 | 45,838 | (440 | ) | (40,468 | ) | 4,945 | ||||||||||||||||
| (*) | See note 1 c. |
| Common stock | Additional paid-in | Accumulated other comprehensive | Accumulated | Total stockholders’ | ||||||||||||||||||||
| Number | Amount | capital | loss | deficit | equity | |||||||||||||||||||
| Balance as of January 1, 2020 | 2,085,900 | 2 | 30,102 | (539 | ) | (28,514 | ) | 1,051 | ||||||||||||||||
| Stock-based compensation related to options granted to employees and consultants | - | - | 163 | - | - | 163 | ||||||||||||||||||
| Issuance of shares, net of issuance cost of $1,000 | 2,439,802 | 3 | 5,992 | - | - | 5,995 | ||||||||||||||||||
| Exercise of warrants and pre funded warrants | 2,632,134 | 2 | 14 | 16 | ||||||||||||||||||||
| Liability reclassified to equity | - | - | 328 | - | - | 328 | ||||||||||||||||||
| Total comprehensive loss | - | - | - | 3 | (2,763 | ) | (2,760 | ) | ||||||||||||||||
| Balance as of June 30, 2020 | 7,157,836 | 7 | 36,599 | (536 | ) | (31,277 | ) | 4,793 | ||||||||||||||||
| Common stock | Additional paid-in | Accumulated other comprehensive | Accumulated | Total stockholders’ | ||||||||||||||||||||
| Number | Amount | capital | loss | deficit | equity | |||||||||||||||||||
| Balance as of April 1, 2021 | 12,145,547 | 12 | 42,671 | (462 | ) | (36,128 | ) | 6,093 | ||||||||||||||||
| Stock-based compensation related to options granted to employees and consultants | - | - | 89 | - | - | 89 | ||||||||||||||||||
| Restricted shares issued to shareholder (*) | 2,500,000 | 3 | 2,615 | - | - | 2,618 | ||||||||||||||||||
| Issuance of shares, net of issuance cost of $32 | 392,780 | - | ** | 463 | - | - | 463 | |||||||||||||||||
| Total comprehensive loss | - | - | - | 22 | (4,340 | ) | (4,318 | ) | ||||||||||||||||
| Balance as of June 30, 2021 | 15,038,327 | 15 | 45,838 | (440 | ) | (40,468 | ) | 4,945 | ||||||||||||||||
| (*) | See note 1 c. |
| (**) | 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 April 1, 2020 | 2,600,701 | 3 | 32,193 | (540 | ) | (29,973 | ) | 1,683 | ||||||||||||||||
| Stock-based compensation related to options granted to employees and consultants | - | - | 93 | - | - | 93 | ||||||||||||||||||
| Issuance of shares, net of issuance cost of $642 | 1,925,001 | 2 | 4,299 | - | - | 4,301 | ||||||||||||||||||
| Issuance of shares, net of issuance cost | 1,925,001 | 2 | 4,299 | - | - | 4,301 | ||||||||||||||||||
| Exercise of warrants and pre funded warrants | 2,632,134 | 2 | 14 | - | - | 16 | ||||||||||||||||||
| Total comprehensive loss | - | - | - | 4 | (1,304 | ) | (1,300 | ) | ||||||||||||||||
| Balance as of June 30, 2020 | 7,157,836 | 7 | 36,599 | (536 | ) | (31,277 | ) | 4,793 | ||||||||||||||||
| 5 |
| Additional | Available | Foreign | Total Stockholders’ | |||||||||||||||||||||||||
| Common stock | paid-in | for sale | currency | Accumulated | Equity | |||||||||||||||||||||||
| Number | Amount | capital | reserve | transaction | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance as of January 1, 2017 | 17,405,359 | 17 | 13,347 | (93 | ) | (102 | ) | (11,644 | ) | 1,525 | ||||||||||||||||||
| Total comprehensive loss | - | - | - | 93 | 15 | (3,519 | ) | (3,411 | ) | |||||||||||||||||||
| Stock-based compensation related to options granted to consultants | - | - | 126 | - | - | - | 126 | |||||||||||||||||||||
| Warrants converted and exercised into equity | 80,359 | (*) | 60 | - | - | 60 | ||||||||||||||||||||||
| Issuance and receipts on account of shares | 592,500 | 1 | 1,207 | - | - | - | 1,208 | |||||||||||||||||||||
| Balance as of September 30, 2017 | 18,078,218 | 18 | 14,740 | - | (87 | ) | (15,163 | ) | (492 | ) | ||||||||||||||||||
MY SIZE, INC. AND ITS SUBSIDIARIES
| Common stock | Additional paid-in | Available for sale | Foreign currency | Accumulated | Total stockholders’ | |||||||||||||||||||||||
| Number | Amount | capital | reserve | transaction | Deficit | Equity | ||||||||||||||||||||||
| Balance as of January 1, 2016 | 15,313,793 | 15 | 4,853 | (67 | ) | (104 | ) | (7,310 | ) | (2,613 | ) | |||||||||||||||||
| Total comprehensive loss | - | - | - | 67 | (49 | ) | (4,120 | ) | (4,102 | ) | ||||||||||||||||||
| Stock-based compensation related to options granted to consultants | - | - | (33 | ) | - | - | - | (33 | ) | |||||||||||||||||||
| Convertible loans converted to equity | 2,091,566 | 2 | 6,728 | - | - | - | 6,730 | |||||||||||||||||||||
| Warrants reclassified to equity as a result of amended exercise price currency | - | - | 1,041 | - | - | - | 1,041 | |||||||||||||||||||||
| Balance as of September 30, 2016 | 17,405,359 | 17 | 12,589 | - | (153 | ) | (11,430 | ) | 1,023 | |||||||||||||||||||
Condensed Consolidated Interim Statements of Cash Flows
U.S. dollars in thousands
| 2021 | 2020 | |||||||
Six-Months Ended June 30, | ||||||||
| 2021 | 2020 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | (5,797 | ) | (2,763 | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | 21 | 19 | ||||||
| Amortization of operating lease right-of-use asset | 22 | 21 | ||||||
| Revaluation of derivatives | 1 | (19 | ) | |||||
| Revaluation of investment in marketable securities | (22 | ) | (15 | ) | ||||
| Expense arising from restricted shares issued to compensate waiver by a shareholder | 2,618 | - | ||||||
| Stock based compensation | 232 | 163 | ||||||
| (Increase) decrease in accounts receivables | (7 | ) | 11 | |||||
| Decrease in other receivables and prepaid expenses | 279 | 64 | ||||||
| Decrease in trade payable | (50 | ) | (90 | ) | ||||
| Increase (decrease) Increase in accounts payable | 34 | (16 | ) | |||||
| Net cash used in operating activities | (2,669 | ) | (2,625 | ) | ||||
| Cash flows from investing activities: | ||||||||
| Change in restricted deposits | 184 | (170 | ) | |||||
| Investment in right-of-use asset | - | (25 | ) | |||||
| Purchase of property and equipment | (12 | ) | (5 | ) | ||||
| Net cash provided by (used in) investing activities | 172 | (200 | ) | |||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuance of shares, net of issuance costs | 5,035 | 6,011 | ||||||
| Proceeds from Exercise of warrants | 797 | - | ||||||
| Net cash provided by financing activities | 5,832 | 6,011 | ||||||
| Effect of exchange rate fluctuations on cash and cash equivalents | (16 | ) | (10 | ) | ||||
| Increase in cash, cash equivalents and restricted cash | 3,319 | 3,176 | ||||||
| Cash, cash equivalents and restricted cash at the beginning of the period | 1,774 | 1,466 | ||||||
| Cash, cash equivalents and restricted cash at the end of the period | 5,093 | 4,642 | ||||||
| Non cash activities: | ||||||||
| Restricted shares issued to shareholder | 2,618 | - | ||||||
The accompanying notes are an integral part of the interim condensed consolidated interim financial statements.
| 6 |
My Size, Inc.MY SIZE, INC. AND ITS SUBSIDIARIES
Notes to Condensed Consolidated Interim Financial Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)(unaudited)
U.S. dollars in thousands (except share data and per share data)
| Additional | Available | Foreign | Total Stockholders’ | |||||||||||||||||||||||||
| Common stock | paid-in | for sale | currency | Accumulated | Equity | |||||||||||||||||||||||
| Number | Amount | capital | reserve | transaction | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance as of July 1, 2017 | 17,605,359 | 17 | 14,052 | (67 | ) | (103 | ) | (14,356 | ) | (457 | ) | |||||||||||||||||
| Total comprehensive loss | - | - | - | 67 | 16 | (807 | ) | (724 | ) | |||||||||||||||||||
| Stock-based compensation related to options granted to consultants | - | - | 53 | - | - | - | 53 | |||||||||||||||||||||
| Warrants converted and exercised into equity | 80,359 | (*) | 60 | 60 | ||||||||||||||||||||||||
| Issuance and receipts on account of shares | 392,500 | 1 | 575 | - | - | - | 576 | |||||||||||||||||||||
| Balance as of September 30, 2017 | 18,078,218 | 18 | 14,740 | - | (87 | ) | (15,163 | ) | (492 | ) | ||||||||||||||||||
(*) Less than $1.
| Common stock | Additional paid-in | Available for sale | Foreign currency | Accumulated | Total stockholders’ | |||||||||||||||||||||||
| Number | Amount | capital | reserve | transaction | Deficit | equity | ||||||||||||||||||||||
| Balance as of July 1, 2016 | 15,313,793 | 15 | 11,155 | 527 | (187 | ) | (10,706 | ) | 804 | |||||||||||||||||||
| Total comprehensive loss | - | - | - | (527 | ) | 34 | (724 | ) | (1,217 | ) | ||||||||||||||||||
| Stock-based compensation related to options granted to consultants | - | - | (39 | ) | - | - | - | (39 | ) | |||||||||||||||||||
| Convertible loans converted to equity | 2,091,566 | 2 | 1,473 | - | - | - | 1,475 | |||||||||||||||||||||
| Balance as of September 30, 2016 | 17,405,359 | 17 | 12,589 | - | (153 | ) | (11,430 | ) | 1,023 | |||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
My Size, Inc.
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Audited)
U.S. dollars in thousands (except share data and per share data)
| Common stock | Additional paid-in | Available for sale | Foreign currency | Accumulated | Total stockholders’ equity | |||||||||||||||||||||||
| Number | Amount | capital | reserve | transaction | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance as of December 31, 2015 | 15,313,793 | 15 | 4,855 | (69 | ) | (104 | ) | (7,310 | ) | (2,613 | ) | |||||||||||||||||
| Total comprehensive loss | - | - | - | (24 | ) | 2 | (4,334 | ) | (4,356 | ) | ||||||||||||||||||
| Stock-based compensation related to options granted to consultants | - | - | (23 | ) | - | - | - | (23 | ) | |||||||||||||||||||
| Convertible loans converted to equity | 2,091,566 | 2 | 7,528 | - | - | - | 7,530 | |||||||||||||||||||||
| Warrants reclassified to equity as a result of amended exercise price currency | - | - | 987 | - | - | - | 987 | |||||||||||||||||||||
| Balance as of December 31, 2016 | 17,405,359 | 17 | 13,347 | (93 | ) | (102 | ) | (11,644 | ) | 1,525 | ||||||||||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
My Size, Inc.
Condensed Consolidated Interim Statements of Cash Flows
| Nine-Months Ended September 30, | Three-Months Ended September 30, | Year ended December 31, | ||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2016 | ||||||||||||||||
$ thousands (Unaudited) | $ thousands (Unaudited) | $ thousands (Unaudited) | $ thousands (Unaudited) | $ thousands (Audited) | ||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||
| Net loss | (3,519 | ) | (4,120 | ) | (807 | ) | (724 | ) | (4,334 | ) | ||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||||||
| Depreciation | 22 | 17 | 7 | 6 | 24 | |||||||||||||||
| Amortization of warrant, convertible loans and derivative | (251 | ) | 2,260 | (101 | ) | 117 | (182 | ) | ||||||||||||
| Revaluation of PUT options | - | - | - | - | 776 | |||||||||||||||
| Revaluation of investment in marketable securities | 472 | - | 132 | - | 1,233 | |||||||||||||||
| Stock based compensation- equity | 126 | (33 | ) | 53 | (39 | ) | (23 | ) | ||||||||||||
| Stock based compensation- liability | 265 | - | 88 | - | - | |||||||||||||||
| Decrease (increase) in receivables and prepaid expenses | 115 | (43 | ) | 61 | (39 | ) | (27 | ) | ||||||||||||
| Increase in derivative liabilities | 126 | - | (27 | ) | - | 80 | ||||||||||||||
| Increase (decrease) in trade payable | 64 | 44 | 127 | (62 | ) | 86 | ||||||||||||||
| Increase (decrease) in other accounts payable | 108 | 127 | (60 | ) | 57 | 208 | ||||||||||||||
| Net cash used in operating activities | (2,472 | ) | (1,748 | ) | (527 | ) | (684 | ) | (2,159 | ) | ||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||
| Purchase of property and equipment | (8 | ) | (31 | ) | (1 | ) | (8 | ) | (36 | ) | ||||||||||
| Net cash used in investing activities | (8 | ) | (31 | ) | (1 | ) | (8 | ) | (36 | ) | ||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||
| Repayment of a loan | (10 | ) | (25 | ) | - | - | (25 | ) | ||||||||||||
| Proceeds from issuance of shares, warrants and convertible loans | 2,506 | 1,043 | 491 | 739 | 1,339 | |||||||||||||||
| Net cash provided by financing activities | 2,496 | 1,018 | 491 | 739 | 1,314 | |||||||||||||||
| Effect of exchange rate changes on cash and cash equivalents | (36 | ) | (15 | ) | (77 | ) | (2 | ) | (4 | ) | ||||||||||
| Increase (Decrease) in cash and cash equivalents | (20 | ) | (776 | ) | (114 | ) | 45 | (885 | ) | |||||||||||
| Cash and cash equivalents at the beginning of the period | 34 | 919 | 128 | 98 | 919 | |||||||||||||||
| Cash and cash equivalents at the end of the period | 14 | 143 | 14 | 143 | 34 | |||||||||||||||
| Non cash transactions | ||||||||||||||||||||
| Warrants reclassified to equity as a result of amended exercise price currency | - | 987 | - | - | 987 | |||||||||||||||
| Conversion of loan to equity | - | 4,939 | - | - | 4,846 | |||||||||||||||
The accompanying notes are an integral part of the condensed consolidated interim financial statements.
My Size, Inc.
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.
| |
| b. | During the six month period ended June 30, 2021, the Company has incurred significant losses and negative cash flows from operations and 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 June 30, 2021, management is of the opinion that its existing cash will be sufficient to fund operations until the end of March 2022. 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. | |
| c. | Further to Note 1b of the Company’s Annual Report on Form 10-K for the year ended December 31, 2020: On May 26, 2021, The Company, My Size Israel and Shoshana Zigdon entered into an Amendment to Purchase Agreement (the “Amendment”) which made certain amendments to a Purchase Agreement between the parties dated February 16, 2014 (the “Purchase Agreement”). Pursuant to the Amendment, Ms. Zigdon agreed to irrevocably waive the right to repurchase certain assets related to the collection of data for measurement purposes that My Size Israel acquired from Ms. Zigdon under the Purchase Agreement and upon which the Company’s business is substantially dependent, and all past, present and future rights in any of the intellectual property rights sold, transferred and assigned to My Size Israel under the Purchase Agreement and any modifications, amendments or improvements made thereto, including, without limitation, any compensation, reward or any rights to royalties or to receive any payment or other consideration whatsoever in connection with such intellectual property rights (the “Waiver”). In consideration of the Waiver, the Company issued shares of common stock to Ms. Zigdon in a private The Company measured the fair value of the shares based on the quoted market price of common stock adjusted to reflect the effect of the sales restrictions. During the six and three month period ended June 30, 2021, an amount of $2,618 was recorded in research and development expense. |
As of September 30, 2017, the Company entered into agreements pursuant to which it raised an aggregate of $8,795 of which $5,753 and $1,410 were received in cash and marketable securities, respectively. The marketable securities are shares of common stock of Diamante Minerals Inc (“DIMN”), which are accounted as a financial asset available for sale and presented in the Company’s balance sheet under investment in marketable securities.
As of September 30, 2017, the Company has $1,177 and $455 in guaranteed notes and checks, respectively as remaining balance from the amounts described above. The guarantee has been provided by an ungraded financial institution. Subsequent to September 30, 2017, $236 of the guarantee notes have been redeemed in cash.
Based on the projected cash flows and cash balances as of September 30, 2017, the Company’s Management is of the opinion that without further fund raising it will not have sufficient resources to enable it to continue its operating activities including the development, and marketing of its products for a period of at least 12 months from the date of approval of these financial statements. 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, see also note 7. There can be no assurances however, that the Company will be successful in obtaining the level of financing needed for its operations. 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 and its subsidiaries collectively referred to as 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 ninesix months ended SeptemberJune 30, 20172021 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2017.2021.
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, 2016.2020.
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.
| 7 |
My Size, Inc.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:
ASCAccounting Standards Codification (“ASC”) 820, “FairFair Value Measurements and Disclosures”,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 (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date.
date, essentially an exit price. In determiningaddition, the fair value of assets and liabilities should include consideration of non-performance risk, which for the Company uses various valuation approaches.liabilities described below includes the Company’s own credit risk.
In accordance with ASC 820 establishes a hierarchy for inputs used inwhen measuring the fair value, that maximizesan entity shall take into account the usecharacteristics of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be usedasset or liability if a market participant would take those characteristics into account when available. Observable inputs are inputs that market participants would use in pricing the asset or liability developed based on market data obtained from sources independent ofat the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.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. |
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
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 accounts receivable, accounts payableother receivables, trade payables and other accounts payable approximate their fair value due to the short-term maturities of such instruments.
The Company holds sharesshare certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publicly-traded company - Diamante Minerals, Inc. which are classified as available-for-sale equity securities. The marketable securities have readily determinable fair market values that are calculated based on the share priceOTCQB.
Due to sales restrictions on the measurement datesale 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 12 assets.
Schedule of Fair value of Financial Assets and Liabilities
| Fair value hierarchy | ||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Financial assets | ||||||||||||||||||||||
My Size, Inc.
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)
| |||||||||||||
| - | - | ||||||||||||
| June 30, 2021 | ||||||||||||
| Fair value hierarchy | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Financial liabilities | ||||||||||||
| Derivatives | - | 2 | - | |||||||||
At September 30, 2017, the fair value (based on quoted market prices) of these securities was $246. During the nine month period ended September 30, 2017 the recognized loss was $472 (At December 31, 2016, gross unrecognized loss, recognized loss and fair value (based on quoted market prices) of these securities were $24, $1,233 and $579, respectively).
| 8 |
My Size, Inc.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, 2020 | ||||||||||||
| Fair value hierarchy | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Financial assets | ||||||||||||
| Investment in marketable securities (*) | - | 59 | - | |||||||||
| (*) | For the six and three month periods ended June 30, 2021 and 2020, the recognized gain (based on quoted market prices with a discount due to security restrictions on iMine shares) of the marketable securities was $22 and $(27), and $15 and $3, respectively. |
| December 31, 2020 | ||||||||||||
| Fair value hierarchy | ||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||
| Financial liabilities | ||||||||||||
| Derivatives | - | 1 | - | |||||||||
Schedule of Stock Based Expenses
Six months ended June 30, | Three months ended June 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Stock-based compensation expense - Research and development | 70 | 51 | 9 | 31 | ||||||||||||
| Stock-based compensation expense - Sales and marketing | 93 | 46 | 68 | 24 | ||||||||||||
| Stock-based compensation expense - General and administrative | 69 | 66 | 12 | 38 | ||||||||||||
| 232 | 163 | 89 | 93 | |||||||||||||
Warrants issued to consultants:
| Nine months ended September 30, | Three months ended September 30, | Year ended December 31, | |||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2016 | |||||||||||||||||
| Stock-based compensation expense - equity awards | 126 | (33 | ) | 53 | (39 | ) | (23 | ) | |||||||||||||
| Stock-based compensation expense - liability awards | 265 | - | 88 | - | - | ||||||||||||||||
| 391 | (33 | ) | 141 | (39 | ) | (23 | ) | ||||||||||||||
| a. | In
During both the six and three month period ended June 30, 2021, an |
In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by Consultant1 up to the sum of NIS500,000. If the consideration for the sale of the shares falls below 90% of the shares’ price on the stock exchange on the date of sale, the Company shall pay Consultant1 the difference. The Company may decide at its own discretion whether to make such payment in cash or shares of common stock.
On March 21, 2017, the shareholders of the Company approved the adoption of the 2017 Consultant Equity Incentive Plan at the Company’s Annual Meeting of Stockholders. The approval was required for the issuance of the options and shares of common stock of the Company issued to Consultant1.
During the nine-month period ended September 30, 2017, costs in the sum of $(4) ($90 during 2016) were recorded by the Company and an undertaking to pay the balance of the consideration was recognized in the sum of $124 ($80 during 2016) according to the fair value of the undertaking.
| b. | In
| |
During both the |
| c. | During the six month period ended June 30, 2021, the Company issued 150,000 warrants to consultants, no such warrants were exercised and warrants to purchase shares expired. |
The total stock option compensation expense during the six and three month period ended June 30, 2021 and 2020 which was recorded under sales and marketing was $, $, $ and $ respectively and under general and administrative was $, $, $ and $, respectively.
| 9 |
My Size, Inc.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.)
Stock Option Plan for Employees:
In March 2017, the Company adopted the My Size, Inc. 2017 Equity Incentive Plan (the “2017 Employee 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, was initially limited to shares of common stock. Stock options can be granted with an exercise price equal to or less than the stock’s fair market value at the grant date. As further described below, in August 2020, the Company’s shareholders approved an increase in the number of shares available for issuance under the Plan to .
On May 25, 2020, the compensation committee of the Board of Directors of the Company reduced the exercise price of outstanding options of employees and directors of the Company for the purchase of an aggregate of shares of common stock of the Company (with exercise prices ranging between $ and $) to $ per share, which was the closing price for the Company’s common stock on May 22, 2020, and extended the term of the foregoing options for an additional one year from the original date of expiration. The incremental compensation cost resulting from the repricing was $53, and the expenses during the six and three month period ended June 30, 2021 were $1, $0 and the expenses during both the six and three months ended June 30, 2020 were $43.
On August 10, 2020, the Company’s shareholders approved an increase in the shares available for issuance under the 2017 Employee Plan from to shares. As a result and pursuant to approval of the Company’s compensation committee that was contingent on the foregoing shareholder approval, the number of shares available for issuance under the Company’s 2017 Consultant Incentive Plan was reduced from to shares.
During the six and three month period ended June 30, 2021, the Company granted an aggregate of of stock options under the 2017 Employee Plan, no such options were exercised and options to purchase and shares of common stock, respectively, expired.
The total stock option compensation expense during the six and three month period ended June 30, 2021 and 2020 which was recorded was $ and $, and $ and $, respectively.
| 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 5 - Contingencies and Commitments
| a. |
On December 27, 2015, the Company received a legal complaint (the “Complaint”). The defendants named in the Complaint were the Company, all the members of the Board of Directors of the Company, the officers of the Company, Mrs. Shoshana Zigdon, a shareholder and related party of the Company, as well as two additional defendants who are not shareholders of the Company. The plaintiff alleged that the Company violated its obligation to register shares purchased by the plaintiff on July 3, 2014 (the “Original Shares”) for trade with the Tel Aviv Stock Exchange.
The Company and plaintiff entered into a settlement agreement (the “Settlement”) dated June 20, 2017 following a mediation process. Pursuant to the Settlement, the Company agreed to make a payment to the plaintiff of NIS325,000 (the “Down Payment”) within 30 days of the date of the Settlement. Additionally, the Company is obligated to register the Original Shares within a specified time frame. Moreover, pursuant to the Settlement, the Company agreed to issue, within 60 days, 80,358 additional shares of common stock to the plaintiff (the “New Shares”), which New Shares shall be registered, to be deposited in escrow and sold for the benefit of plaintiff. To the extent the Company will not issue the unrestricted New Shares within 60 days of the Settlement, the plaintiff has a right, at his sole discretion, to resume the legal proceedings pursuant to the Complaint, provided he deposits the Down Payment in an escrow account, pending the Court’s final adjudication of the Complaint. Additionally, the Settlement provides that to the extent the aggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS1,600,000, the Company will either complement the difference in cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion.
During the three month period ended September 30 2017, the Company issued shares and recorded an amount of $60 in equity and paid the plaintiff the Down Payment. As of September 30, 2017, The Company recorded a derivative liability in the amount of $176.
| ||
The Company |
| b. | On July 5, 2021, the Company was served with a legal complaint filed by Fidelity Venture Capital Ltd. and Dror Atzmon in the Magistrate’s Court in Tel Aviv for a monetary award in an amount of NIS 1,436,679 and a declaratory relief. The plaintiffs allege that the Company breached its contractual obligations to pay them for services allegedly rendered to the Company by the plaintiffs under a certain consulting agreement dated July 2, 2014, in an amount of NIS 819,000. Additionally, the plaintiffs allege that the Company should compensate them for losses allegedly incurred by them following their investment in the Company’s shares issued under a certain private offering. In the At this preliminary stage, before any fact finding and pre-trial procedures (including disclosure of documents) have been conducted and before the statement of defense has been prepared and filed, the Company |
My Size, Inc.
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 (cont’d)
|
Note 6 - Significant Events During the Reporting Period
| a. | On January 8, 2021, the Company conducted a public offering of its securities pursuant to which it issued shares of its common stock for gross proceeds of $2,008. The net proceeds to the Company from the offering were approximately $1,700, after deducting placement agent’s fees and other estimated offering expenses payable by the Company. |
| b. | In January and February |
| c. | On March 25, 2021, the Company conducted a public offering of its shares of common stock pursuant to which it issued shares of its common stock for gross proceeds of $3,300. The net proceeds to the Company from the offering were approximately $2,872, after deducting placement agent’s fees and other estimated offering expenses payable by the Company. | |
| d. | On May 7, 2021, the Company | |
In accordance with NASDAQ Listing Rule 5810(c)(3)(C), the Company has a grace period of 180 calendar days, or until December 4, 2017, to regain compliance with NASDAQ Listing Rule 5550(b)(2). The Company will endeavor to rectify the situation and to meet the MVLS Requirement.
During August and September 2017, the Company received $341 from the investments in cash. The remaining amount of the investment is guaranteed by notes. Subsequent to September 30 2017, $236 was received in cash.
My Size, Inc.
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
U.S. dollars in thousands (except share data and per share data)
Note 6 - Significant Events During the Reporting Period (cont’d)
| e. | On May 26, 2021, the Company | |
| ||
| f. | In late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. While initially the outbreak was largely concentrated in China, it has now spread to Israel and the United States, and infections have been reported globally. Many countries around the world, including in Israel, have from time to time significant governmental measures being implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. These measures have resulted in work stoppages and other disruptions. The Company |
Note 7 - Subsequent Events
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read theThe following discussion alongand 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 related notes to the financial statements, which are included in this report. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions, including those discussed under “Risk Factors”Quarterly Report on Form 10-Q. This information should also be read in conjunction with the information contained in our annual reportAnnual Report on Form 10-K for the year ended December 31, 2016. Our2020, filed with the Securities and Exchange Commission on March 29, 2021, or the Annual Report, including the consolidated annual financial statements as of December 31, 2020 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 achievementsassumptions 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; | |
| ● | risks related to the COVID-19 pandemic; | |
| ● | 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. |
| 12 |
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 impliedon 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 forward-lookingcautionary 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, Topspin Medical (Israel) Ltd and My Size LLC. 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 mainly focusing on the e-commerce fashion/apparel industry. In addition, our solutions address the shipping/parcel and DIY uses markets.
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.
| 13 |
Important Information about COVID-19
In late 2019, a novel strain of COVID-19, also known as coronavirus, was reported in Wuhan, China. While initially the outbreak was largely concentrated in China, it has now spread to Israel and the United States, and infections have been reported globally. Many countries around the world, including in Israel, have from time to time significant governmental measures implemented to control the spread of the virus, including temporary closure of businesses, severe restrictions on travel and the movement of people, and other material limitations on the conduct of business. These measures have resulted in work stoppages and other disruptions. We implemented remote working and work place protocols for our employees in accordance with Israeli government requirements. In addition, while we have seen an increased demand for MySizeID, the COVID-19 pandemic has had a particularly adverse impact on the retail industry and this has resulted in an adverse impact on our marketing and sales activities. For example, we have three ongoing pilots with international retailers that have been halted, we are unable to participate physically in industry conferences, our ability to meet with potential customers is limited, and in certain instances sales processes have been delayed or cancelled. The extent to which COVID-19 continues to impact our operations will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration and severity of the outbreak, and the actions that may be required to contain COVID-19 or treat its impact.
Results of Operations
NineThe table below provides our results of operations for the periods indicated.
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| (dollars in thousands) | (dollars in thousands) | |||||||||||||||
| Revenues | $ | 30 | $ | 21 | $ | 57 | $ | 51 | ||||||||
| Cost of revenues | - | - | - | (1 | ) | |||||||||||
| Gross profit | 30 | 21 | 57 | 50 | ||||||||||||
| Research and development expenses | (3,007 | ) | (340 | ) | (3,380 | ) | (688 | ) | ||||||||
| Sales and marketing | (731 | ) | (452 | ) | (1,277 | ) | (1,077 | ) | ||||||||
| General and administrative | (605 | ) | (562 | ) | (1,229 | ) | (1,078 | ) | ||||||||
| Operating loss | (4,313 | ) | (1,333 | ) | (5,829 | ) | (2,793 | ) | ||||||||
| Financial income (expenses), net | (27 | ) | 29 | 32 | 30 | |||||||||||
| Net loss | $ | (4,340 | ) | $ | (1,304 | ) | $ | (5,797 | ) | $ | (2,763 | ) | ||||
Six and three months ended SeptemberThree Months Ended June 30, 2017 compared2021 Compared to nineSix and three months ended SeptemberThree Months Ended June 30, 20162020
Revenues
From inception through September 30, 2017,
We started to generate revenue in 2019 and we have sustained an accumulated deficit of approximately $15.1 million. From inception through September 30, 2017, we have not generated any revenue from operations and expect to incur additional losses to increase our sales and marketing efforts and to perform further research and development activitiesactivities. Our revenues for the six months ended June 30, 2021 amounted to $57,000 compared to $51,000 for the six months ended June 30, 2020.
Our revenues for the three months ended June 30, 2021 amounted to $30,000 compared to $21,000 for the three months ended June 30, 2020. The increase from both six and do not currently have any commercial products. Our product development efforts are stillthree months corresponding period primarily resulted from increase in their early stages and we are currently unable to estimatetraffic, as measured by the cost or time they will take to complete.MySizeID engine per the license agreements.
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Research and Development Expenses
Our research and development expenses for the ninesix months ended SeptemberJune 30, 20172021 amounted to $624,000$3,380,000 compared to $500,000$688,000 for the ninesix months ended SeptemberJune 30, 2016.2020. The increase betweenfrom the corresponding periodsperiod primarily resulted from increased expenses relatedshare based payment in amount of $2,618,000 attributed to subcontractors and the increased expenses associated with the hiring of new employees.share issuance to Shoshana Zigdon under that certain Amendment to Purchase Agreement dated May 26, 2021.
Our research and development expenses for the three months ended SeptemberJune 30, 20172021 amounted to $213,000$3,007,000 compared to $172,000$340,000 for the three months ended SeptemberJune 30, 2016.2020. The increase betweenfrom the corresponding periodsperiod primarily resulted from increasedshare based payment in amount of $2,618,000 attributed to the share issuance to Shoshana Zigdon under that certain Amendment to Purchase Agreement dated May 26, 2021.
Sales and Marketing Expenses
Our sales and marketing expenses relatedfor the six months ended June 30, 2021 amounted to subcontractors and$1,277,000 compared to $1,077,000 for the increased expenses associatedsix months ended June 30, 2020. The increase in comparison with the corresponding period was mainly due to an increase in payments to consultants, share-based payments and hiring of new employees. sales consultants offset by decrease in travel and marketing expenses.
Our sales and marketing expenses for the three months ended June 30, 2021 amounted to $731,000 compared to $452,000 for the three months ended June 30, 2020. The increase in comparison with the corresponding period was mainly due to an increase in payments to consultants, hiring new sales consultants and increase in share-based payments was offset by decrease in marketing expenses.
Marketing, General and Administrative Expenses
Our marketing, general and administrative expenses for the ninesix months ended SeptemberJune 30, 20172021 amounted to $2,667,000$1,229,000 compared to $1,359,000$1,078,000 for the ninesix months ended SeptemberJune 30, 2016.2020. The increase betweenin comparison with the corresponding period was mainly due to an increase in expenses was derived mainly from share based payments, increases in public relations and investor relations expenses and from increased expenses associated with the hiring of new employees. insurance expenses.
Our marketing, general and administrative expenses for the three months ended SeptemberJune 30, 20172021 amounted to $611,000$605,000 compared to $434,000$562,000 for the three months ended SeptemberJune 30, 2016.2020. The increase betweenin comparison with the corresponding period was mainly due to an increase in expensesinsurance expenses.
Operating Loss
As a result of the foregoing, for the six month ended June 30, 2021, our operating loss was $5,829,000, an increase of $3,036,000, or 109%, compared to our operating loss for the six month ended June 30, 2020 of $2,793,000. The increase from the corresponding period primarily resulted from share based payment in amount of $2,618,000 attributed to the share issuance to Shoshana Zigdon under that certain Amendment to Purchase Agreement dated May 26, 2021.
As a result of the foregoing, for the three month ended June 30, 2021, our operating loss was $4,313,000, an increase of $2,980,000, or 223%, compared to our operating loss for the three month ended June 30, 2020 of $1,333,000. The increase from the corresponding period primarily resulted from share based payment in amount of $2,618,000 attributed to the share issuance to Shoshana Zigdon under that certain Amendment to Purchase Agreement dated May 26, 2021.
Financial Income, Net
Our financial income, net for the six months ended June 30, 2021 amounted to $32,000 as opposed to financial income of $30,000 for the six months ended June 30, 2020. During the six months ended June 30, 2021, financial income derived mainly from share based payments, increases in public relations and investor relations expenses and from increased expenses associated with the hiring of new employees.
Financial income and expense, net
Our financial expenses for the nine months ended September 30, 2017 amounted to $228,000, compared to financial expense of $2,261,000 for the nine months ended September 30, 2016. The decrease between the corresponding periods in financial expenses was derived mainly from the creation and revaluation of the components of the options, derivatives and investment in marketable securities.and from exchange rate expenses.
Our financial incomeexpense, net for the three months ended SeptemberJune 30, 20172021 amounted to $17,000$27,000 compared to financial expenseincome of $118,000$29,000 for the three months ended SeptemberJune 30, 2016. The decrease between2020. During the corresponding periods inthree months ended June 30, 2021, financial expenses wasmainly derived mainly from the creation and revaluation of the components of the options, derivatives and investment in marketable securities.securities whereas in the corresponding period we had financial income mainly from investment in marketable and from exchange rate expenses.
Net Loss from continuing operations
As a result of the foregoing research and development, sales and marketing, general and administrative expenses initial revenues, and financial expenses, our net loss from continuing operations for the ninesix months ended SeptemberJune 30, 20172021 was $3,519,000,$5,797,000 compared to a net loss from continuing operationsof $2,763,000 for the ninesix months ended SeptemberJune 30, 2016 of $4,120,000. The main reasons for2020, the change betweenincrease in the corresponding periods isnet loss was mainly due to the reasons mentioned above.
As a decrease in finance expenses mainly from the creation and revaluationresult of the components of the options, derivativesforegoing research and investment in marketable securities in the corresponding period. This decrease was partially offset by an increase in share based payments, increases in public relationsdevelopment, sales and investor relationsmarketing, general and administrative expenses initial revenues, and from increasedfinancial expenses, associated with the hiring of new employees.
Ourour net loss from continuing operations for the three months ended SeptemberJune 30, 20172021 was $807,000,$4,340,000, compared to a net loss from continuing operationsof $1,304,000 for the three months ended SeptemberJune 30, 2016 of $724,000. The decrease between2020, the corresponding periodsincrease in the net loss was mainly due to finance expenses from the revaluation of options and derivatives in the corresponding period. This decrease was partially offset by an increase in share based payments, increases in public relations and investor relations expenses and from increased expenses associated with the hiring of new employees.reasons mentioned above.
Liquidity and Capital Resources
Since our inception, we have funded our operations primarily through public and private offerings of ourdebt and equity securities.in the State of Israel and in the U.S.
As of SeptemberJune 30, 2017,2021, we had cash, and cash equivalents, restricted cash of $14,000 as$5,093,000 compared to $34,000$1,774,000 of cash, cash equivalents and restricted cash as of December 31, 2016.2020. This increase primarily resulted from the public offerings that we completed in January and March 2021, including the overallotment that closed in May 2021, and proceeds from warrants that were exercised, as further described below.
Net cashOn March 25, 2021, we completed an underwritten public offering of our common stock pursuant to which we issued 2,618,532 shares of our common stock at a public offering price of $1.26 per share for gross proceeds of approximately $3,300,000. We received net proceeds of approximately $2,872,000, after deducting the underwriting discounts and commissions and estimated offering expenses. On May 7, 2021, we issued an additional 392,780 shares of our common stock in connection with the full exercise of the underwriter’s overallotment option granted in the March 2021 public offering. These additional shares were sold to the underwriter at a public offering price of $1.26 per share, resulting in additional net proceeds, after deducting the underwriting discount, of $463,260.
Prior to that, on January 8, 2021, we completed an underwritten public offering of our common stock pursuant to which we issued 1,569,179 shares of our common stock at a public offering price of $1.28 per share for gross proceeds of approximately $2,008,000. We received net proceeds of approximately $1,700,000, after deducting the underwriting discounts and commissions and estimated offering expenses. Furthermore, in January and February 2021, a holder of warrants exercised warrants to purchase 725,000 of our ordinary shares in exchange for $797,000.
Cash used in operating activities was $2,472,000amounted to $2,669,000 for the ninesix months ended SeptemberJune 30, 20172021, compared to $1,748,000$2,625,000 for the ninesix months ended SeptemberJune 30, 2016.2020.
The increase inNet cash used in operating activities mainly resulted from increased payments to service providers and Company employees. The Company has also incurred expenses not in the ordinary course of its business mainly from the registration of patents, the listing of the common stock on the NASDAQ Capital Market and legal expenses associated with lawsuits involving the Company.
Net cashed used inprovided by investing activities was $8,000$172,000 for the ninesix months ended SeptemberJune 30, 20172021, compared to $31,000$200,000 (used in) investing activities for the ninesix months ended SeptemberJune 30, 2016. The negative cash flow resulted from purchase of equipment.2020.
Net cash provided by financing activities was $2,496,000$5,832,000 for the ninesix months ended SeptemberJune 30, 20172021, compared to $1,018,000$6,011,000 for the ninesix months ended SeptemberJune 30, 2016.2020. The cash flowsflow from financing activities for the ninesix months ended SeptemberJune 30, 2017 was mainly due to realization of guarantees.
On August 16, 2017,2021 resulted from the Board of Directors approved agreements with three private investors who will provide an investment totaling $780public offerings that occurred in exchange for $780,000 shares of common stockJanuary 2021 and March 2021, including the full exercise of the Company.underwriter’s overallotment option that occurred in May 2021 and from proceeds that were received from an investor for warrants that were exercised.
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During August and September 2017,We do not have any material commitments for capital expenditures during the Company received $341 from the investments in cash. The remaining amount of the investment is guaranteed by notes issued by an ungraded financial institution in favor of the Company. In the event that the investor does not fulfill its obligationnext twelve months.
We expect to purchase the shares of the Company’s Common Stock with respect to which the guarantee note has been issued, then the Company may call the guarantee note; provided, however, the existing guarantee note currently expires on November 14, 2017. As of the date of this report, the Company is in discussions with the investor regarding the extension of the guarantee note, however, an extended guarantee note has not yet been approved or put in place. Subsequent to September 30 2017, $236 was received in cash.
On October 26, 2017, the Company entered into a securities purchase agreement to sell original issue discount non-convertible notes (the “Notes”) and warrants (the “Warrants”) to certain accredited investors in a private placement transaction (the “Offering”). In connection with such Offering, the Company issued (i) Notes with a principal amount of $1.33 million and (ii) 888,888 Warrants. The Offering resulted in gross proceeds to the Company of approximately $1.2 million, before deducting placement agent and other offering expenses.
The Notes are due on the earlier of the four month anniversary from the date of their issuance or the completion of another equity offering. The Warrants have a five-year term and will have an exercise price of $0.75 per share.
As of September 30, 2017, the Company has $1,177 and $455 in guaranteed notes and checks, respectively as remaining balance from the amounts described above. The guarantee has been provided by an ungraded financial institution. As previously disclosed, the checks have not been honored, continue to remain outstanding,generate losses and no shares will be issued on thesenegative cash flows from operations for the foreseeable future and expect to need to obtain additional funds untilin the entire outstanding amount of the checks has been fully paid.
Subsequent to September 30, 2017, the sum of $236 of the guarantee notes has been redeemed in cash.
future. Based on the projected cash flows and its cash balances as of SeptemberJune 30, 2017, the Company’s Management2021, management is of the opinion that without furtherour existing cash will be sufficient to fund raising it will not have sufficient resources to enable it to continue its operating activities includingoperations until the development, and marketingend of its products for a period of at least 12 months from the date of approval of these financial statements.March 2022. As a result, there areis substantial doubt about the Company’s ability to continue as a going concern. However, 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 and exchange rules. |
Management’s plans includeCurrent conditions in the continued commercializationcapital markets are such that traditional sources of their productscapital 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, the COVID-19 pandemic, economic conditions shareholder activism and securing sufficient financinga 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 additional equity securities,or convertible debt or capital inflows from strategic partnerships. There are no assurances however, that the Company will be successful in obtaining the level of financing needed for its operations. 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.
A downturn in the United States stock and debt markets could make it more difficult to obtain financing throughsecurities, 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, securities. Even ifby 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 are ablemay 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 raise the funds required, it is possiblerecognize 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 could incur unexpected costs and expenses, fail to collect significant amounts owedmay need may not be available on terms favorable to us, or experience unexpected cash requirements that would force us to seek alternative financing. Further, if we issue additional equity or debt securities, stockholders may experience additional dilution or the new equity securities may have rights, preferences or privileges senior to those of existing holders of our shares of common stock or the debt securities may cause us to be subject to restrictive covenants. Even ifat all. If we are ableunable to raise the funds required, it is possible that we could incur unexpected costs and expenses, fail to collect significant amounts owed to us, or experience unexpected cash requirements that would force us to seek additional financing. Ifobtain such additional financing is not available or is not available on acceptable terms,a timely basis, we willmay have to curtail our operations.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. GAAP.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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Equity-based compensation
Revenue from Contracts with Customers
The Company implemented ASC 606, Revenue from Contract with Customers.
To recognize revenue under ASC 606, the Company applies ASC 505-50, “Equity-Based Paymentsthe 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. |
The Company’s revenue is derived from the sale of cloud-enabled software subscriptions, associated software maintenance and support.
Revenue is recognized when a contract exists between the Company and a customer (business) and upon transfer of control of promised products or services to Non-Employees”customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which may be capable of being distinct and accounted for as separate performance obligations. In case of offerings such as cloud-enabled subscription, other service elements in the contract are generally delivered concurrently with respectthe subscription services and therefore revenue is recognized in a similar manner as the subscription services.
Product, Subscription and Services Offerings
Such performance obligations includes cloud-enabled subscriptions, software maintenance, training and technical support.
Fully hosted subscription services (SaaS) allow customers to optionsaccess hosted software during the contractual term without taking possession of the software. Cloud-hosted subscription services are sold on a fee-per-subscription that is based on consumption or usage (per fit recommendation).
We recognize revenue ratably over the contractual service term for hosted services that are priced based on a committed number of transactions where the delivery and warrants issuedconsumption of the benefit of the services occur evenly over time, beginning on the date the services associated with the committed transactions are first made available to non-employees.the customer and continuing through the end of the contractual service term. Over-usage fees and fees based on the actual number of transactions are billed in accordance with contract terms as these fees are incurred and are included in the transaction price of an arrangement as variable consideration. Fees based on a number of transactions or impressions per month, are allocated to the period in which the transactions occur. Revenue for subscriptions sold as a fee per period is recognized ratably over the contractual term as the customer simultaneously receives and consumes the benefit of the underlying service.
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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 carried out an evaluationmaintain disclosure controls and procedures that are designed to ensure that information required byto be disclosed in our reports under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), under the supervision and with the participation of the Company’s management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) ofor the Exchange Act, as ofand the end of the period covered by this report. Based on this evaluation, our principal executive officerrules and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the Exchange Actregulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance 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.
Our In designing and evaluating the disclosure controls and procedures, are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however,management recognizes that our disclosureany controls and procedures, will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is basedrequired 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 June 30, 2021. Based upon certain assumptionssuch evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of June 30, 2021 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 itsthe objectives willof 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 met. Further,considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.
Changes in Internal Controls
During the most recent fiscal quarter, thereno change has not occurred any change in our internal control over financial reporting that has materially affected, or is 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.
We are not currently a party to any material legal proceedings except as described below.
In a pre-trial hearing dated MarchOn August 7, 2016,2018, we commenced an action against North Empire LLC, or North Empire, in the court decided that disclosure would take place and disclosure affidavits along with copiesSupreme Court of the documents specified therein were exchanged betweenState of New York, County of New York for breach of a Securities Purchase Agreement or 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 parties. Following the recommendationsame Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the court, on March 20, 2016, the plaintiffAgreement. On September 6, 2018, North Empire filed a noticeNotice of deletionDiscontinuance of certain defendants including boardthe action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answer and management members, excludingasserted counterclaims in the chairmanaction 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 the CEOnow former Chairman of the Company fromBoard filed a motion to dismiss North Empire’s third-party complaint. On January 6, 2020, the statement of claim.
All pre-trial preliminary proceedings as well as submission of all evidentiary affidavitsCourt granted the motion and expert opinions by both parties have been completed. Pursuant todismissed the Israeli Court’s recommendation, the case was referred to mediation by the honorable Judge (Rtd.) Hilla Gerstel, former president of the Central District Court.
The mediationthird-party complaint. Discovery has been completed and the Company and the plaintiff entered into a settlement agreement (the “Settlement”) dated June 20, 2017. Pursuant to the Settlement, the Company agreed to make a payment to the plaintiff of NIS325,000 (as of the date hereof, approximately USD$92,000) (the “Down Payment”) within 30 days of the date of the Settlement. Additionally, the Company is obligated to register the Original Shares within a specified time frame. Additionally, pursuant to the Settlement, the Company agreed to issue, within 60 days, 80,358 additional shares of common stock to the plaintiff (the “New Shares”), which New Shares shall be registered, to be deposited in escrow and soldboth parties have filed motions for the benefit of plaintiff. Such New Shares shall be sold at a maximum aggregate price of NIS10,000 or an amount constituting not more than 2% of the average volume of trades within the last 90 days, whichever higher, in one single trading day. To the extent the Company does not issue the unrestricted New Shares within 60 days, the Plaintiff has a right, at his exclusive discretion, to resume the proceedings pursuant to the complaint, provided he will deposits the Down Payment in an escrow account, pending the Court’s final adjudication of the complaint. Additionally, the Settlement provides that to the to the extent the aggregate proceeds from the sale of the Original Shares and the New Shares is less than NIS1,600,000, the Company will either complement the difference in cash or shall issue to the plaintiff additional shares of common stock in lieu thereof, at the Company’s sole discretion.
On September 5, 2017, the court rendered a judgment in connection with the case (the “Judgement”), under which the complaint againstclaims and counterclaims.
On July 5, 2021, the Company was accepted,served with a legal complaint filed by Fidelity Venture Capital Ltd. and Dror Atzmon in the complaint against the CEO Mr. Ronen Luzon was rejectedMagistrate’s Court in Tel Aviv for a monetary award in an amount of NIS 1,436,679 and the Company’s counter-claim was rejected.
declaratory relief. The Judgment included: (1) A declaratory remedy, under whichplaintiffs allege that the Company breached its contractual undertakings towardobligations to pay them for services allegedly rendered to the Company by the plaintiffs to list their shares both on the Tel Aviv Stock Exchange and on NASDAQ; (2) An order that the Company take any and all actions required for the listing of the plaintiffs shares, including instructing the Company’s transfer agent to remove the legend or any other restriction from the plaintiffs stock certificate and to issue them with new stock certificates free and clear from any restriction; (3) An order that the registration company of Bank Hapoalim electronically list all of the plaintiffs’ shares detailed in the complaint on the electronic trading system; (iv) The rejection of the complaint against the Company’s CEO, Mr. Luzon, and (4) An order that the Company pay the plaintiffs costs in the amount of NIS 70,000 (which amount is linked to the Israeli CPI and bearing legal interest from the Judgement date until actual payment if effected). Other than the payment of costs the Judgment bears no financial liability on the Company. On October 3 2017, the Company appealed the Judgment with the Supreme Court of Israel, and simultaneously, filed with the Supreme Courtunder a Motion for Stay of Execution of the Judgement, pending the outcome of the appeal.
On October 19, 2017, the respondents filed their response to the Motion and on November 2, 2017 the Company filed its reply the respondents’ response. On November 8, 2017, the Supreme Court upheld the Motion to Stay and ordered that the execution of the Judgment will be stayed pending the outcome of the Appeal, provided that the Company will deposit in the Court’s treasury an autonomous Israeli CPI linked bank guaranteecertain consulting agreement in an amount of NIS 1,700,000, to cover819,000. Additionally, the respondents’ potential damages should the appeal be ultimately denied.
The Company received advice from its legal counselplaintiffs allege that the burden of proofCompany should compensate them for losses allegedly incurred by them following their investment in the Company’s shares issued under a certain private offering. In the alternative, the plaintiffs move that the Judgment is wrongcourt will declare the investment agreement void with full restitution of plaintiffs’ original investment in an amount of NIS 1,329,650. At this preliminary stage, before any fact finding and should be reversed lies withpre-trial procedures (including disclosure of documents) have been conducted and before the appellant. Consequently,statement of defense has been prepared and filed, we cannot evaluate the Company believes that it is more likely thatchances of the appeal will be denied rather than being accepted. In the event that the appeal is the Appeal will be denied, no direct financial liability will be imposed on the Company (other than legal costs which the court may order the losing sideclaim to pay).succeed.
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Item 1A. Risk Factors.
Not requiredOur business could be negatively affected as a result of a potential proxy contest for the election of directors at our annual meeting or other stockholder activism.
In May 2021, we received notice from a smaller reporting company.purported stockholder of its intention to nominate four candidates to stand for election to our Board of Directors at our 2021 annual meeting of stockholders. If this purported stockholder or any other stockholder engages in a proxy contest or other stockholder activism, we could incur significant legal fees and proxy solicitation expenses, and such actions would require significant time and attention by management and our Board of Directors. The potential of a proxy contest or other stockholder activism could interfere with our ability to execute our strategic plan, give rise to perceived uncertainties as to our future direction, adversely affect our relationships with key business partners, result in the loss of potential business opportunities or make it more difficult to attract and retain qualified personnel, any of which could materially and adversely affect our business and operating results. The market price of our common stock could be subject to significant fluctuation or otherwise be adversely affected by the events, risks and uncertainties related to any such stockholder activism.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Except as set forth below and other than as disclosed in a Current Report on Form 8-K, there were no unregistered sales of equity securities by the Company during the three month period ended June 30, 2021.
On August 16, 2017, the CompanyIn May 2021, we entered into an agreement with a securitiesconsultant pursuant to which we agreed to issue warrants to purchase agreement (the “SPA”) with two investors. Pursuant to the SPA, the Company sold an aggregate of 250,000100,000 shares of common stock, par value $0.00150,000 of which are exercisable at $1.50 per share (the “Common Stock”),and 50,000 of which are exercisable at a purchase price of $1.00$2.00 per share, to one investor.
On August 16, 2017, the Companyin each case exercisable until December 31, 2022. In addition, in June 2021, we entered into an agreement with a securities purchase agreement (the “Installment SPA”) with an investorconsultant pursuant to which the investor willwe agreed to issue warrants to purchase $530,00050,000 shares of the Company’s Common Stockcommon stock at $1.00an exercise price of $1.50 per share in separate installments.
In connection withexercisable until December 31, 2022. The warrants and the foregoing,shares underlying the Company relied upon thewarrants were offered and sold pursuant to an exemption from securitiesthe registration provided byrequirements under Section 4(a)(2) underof the Securities Act of 1933, as amended, forsince, among other things, the transactions did not involvinginvolve a public offering.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.The information set forth below is included herein for the purpose of proving the disclosure required under “Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers”.
On August 11, 2021, the Company’s board of directors increased the size of the board of directors to five members and appointed Guy Zimmerman to serve on the Company’s board of directors, effective immediately and to serve until the next annual meeting of the Company’s stockholders.
Guy Zimmerman, age, 53, serves as Founder and CEO of ManuFuture, an online b2b engineering market place, since February 2021. Prior to that from 2017 to 2021, Mr. Zimmerman acted as a consultant to several technology start-ups and was a founding partner of a business travel online platform. From 2013 to 2017, Mr. Zimmerman served as EVP of Marketing and Business Development of Kornit Digital and was part of the IPO leadership. Prior to that, Mr. Zimmerman served as VP of Global Sales and Business Development at Tefron Ltd., a provider of seamless garment technology, where he led the $100m sales and sales support organization serving global retail and fashion brands. Prior to that he served as Vice President of Strategy and Business Development at Tnuva Group, Israel’s largest food manufacturer and spent eight years at McKinsey & Company. Mr. Zimmerman previously led a software startup in the field of operational healthcare management systems. Mr. Zimmerman holds a B.Sc. in Industrial Engineering from Tel Aviv University in Israel.
There are no arrangements or understandings between Mr. Zimmerman and any other persons pursuant to which he was appointed as a director. There are also no family relationships between Mr. Zimmerman and any of the Company’s other directors or executive officers, and he has no direct or indirect material interest in any transaction required to be disclosed pursuant to Item 404(a) of Regulation S-K.
Mr. Zimmerman will receive compensation for his board service as a non-employee director consistent with the Company’s other non-employee directors.
On August 16, 2021, the Company’s compensation committee approved an increase in base salary to (i) Ronen Luzon, the Company’s Chief Executive Officer, from 50,000 NIS to 55,000 NIS per month, (ii) Or Kles, the Company’s Chief Financial Officer, from 30,000 NIS to 38,000 NIS per month, and (iii) Billy Pardo, the Company’s Chief Operating Officer, from 40,000 NIS to 47,500 NIS per month, effective August 1, 2021.
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Item 6. Exhibits.
| Exhibit Number | Description of Exhibits | |
| Amendment to Purchase Agreement between My Size Israel 2014 Ltd., My Size, Inc. and Shoshana Zigdon | ||
| 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 | |
| 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 |
* Filed herewith.
** Furnished 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: | By: | /s/ Ronen Luzon |
| Ronen Luzon | ||
Chief Executive Officer (Principal Executive Officer) | ||
| Date: | By: | /s/ Or Kles |
| Or Kles | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
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