Item
1. Financial Statements.
My
Size, Inc. and Subsidiaries
Condensed
Consolidated Interim
Financial
Statements
As
of September 30, 2017
(unaudited)
U.S.
Dollars in Thousands
My
Size, Inc.
Condensed
Consolidated Interim Financial Statements as of September 30, 2017 (Unaudited)
Contents
|
Page
|
|
|
Condensed
Consolidated Interim Balance Sheets
|
3
|
|
|
Condensed
Consolidated Interim Statements of Comprehensive Loss
|
4
|
|
|
Condensed
Consolidated Interim Statements of Changes in Stockholders’ Equity (Deficit)
|
5-7
|
|
|
Condensed
Consolidated Interim Statements of Cash Flows
|
8
|
|
|
Notes
to Condensed Consolidated Interim Financial Statements
|
9-14
|
My
Size, Inc.
Condensed
Consolidated Interim Balance Sheets
U.S.
dollars in thousands (except share data and per share data)
|
|
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.
My
Size, Inc.
Condensed
Consolidated Interim Statements of Comprehensive Loss
U.S.
dollars in thousands (except share data and per share data)
|
|
Nine-Months Ended
September 30,
|
|
|
Three-Months Ended
September 30,
|
|
|
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 condensed consolidated interim financial statements.
My
Size, Inc.
Condensed
Consolidated Interim Statements of Changes in Stockholders’ Equity (Deficit) (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 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
|
)
|
|
|
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
|
|
The
accompanying notes are an integral part of the condensed consolidated interim financial statements.
My
Size, Inc.
Condensed
Consolidated Interim Statements of Changes in Stockholders’ Equity (Deficit) (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. (the “Company”),
is a dual listed publicly traded company whose common stock is publicly trading on the TASE since September 2005 (under the name
Topspin Medical Inc) and on the NASDAQ Capital Market (“NASDAQ”) since July 25, 2016. The Company has developed a measurement
technology based on algorithms with broad applications in a variety of areas, from the apparel e-commerce market to Do It Yourself
(“DIY”) smartphone and tablet apps. The technology is driven by several patent-pending algorithms which are able to
calculate and record measurements in a variety of novel ways.
Since February 2014, the Company also operates
via a wholly-owned subsidiary, My Size (Israel) 2014 Ltd., a company registered in Israel.
|
|
|
|
|
b.
|
Since inception, the Company has incurred losses and negative cash flows from operations, and as of the date of the report has an accumulated loss amounting to approximately $15.1 million. The Company has financed its operations mainly through fundraising from private investors.
|
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 interim 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 nine months ended September 30, 2017 are not necessarily indicative of the results that
may be expected for any future period or for the year ending December 31, 2017.
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.
The
preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect
the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially
from these estimates.
My
Size, Inc.
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:
ASC
820, “Fair Value Measurements and Disclosures”, 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.
In
determining fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring
fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most
observable inputs be used 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 of 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.
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 payable and other accounts payable approximate their fair value due to the
short-term maturities of such instruments.
The Company holds shares in 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 price on the measurement date and
ranked as Level 1 assets.
|
|
|
September
30, 2017
|
|
|
|
|
Fair
value hierarchy
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Financial
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment
in marketable securities
|
|
|
246
|
|
|
|
-
|
|
|
|
-
|
|
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)
|
|
|
September
30, 2017
|
|
|
|
|
Fair
value hierarchy
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
|
-
|
|
|
|
299
|
|
|
|
-
|
|
|
Warrants
and share based liabilities
|
|
|
-
|
|
|
|
136
|
|
|
|
-
|
|
|
|
|
December
31, 2016
|
|
|
|
|
Fair
value hierarchy
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Financial
assets
|
|
|
|
|
|
|
|
|
|
|
Investment
in marketable securities
|
|
|
579
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
December
31, 2016
|
|
|
|
|
Fair
value hierarchy
|
|
|
|
|
Level
1
|
|
|
Level
2
|
|
|
Level
3
|
|
|
Financial
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
liabilities
|
|
|
-
|
|
|
|
80
|
|
|
|
-
|
|
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).
My
Size, Inc.
Notes
to Condensed Consolidated Interim Financial Statements (unaudited)
U.S.
dollars in thousands (except share data and per share data)
Note
4 - Stock Based Compensation
The
stock based expense (income) recognized in the financial statements for services received from non-employees is related to Marketing,
General and Administrative expenses and shown in the following table:
|
|
|
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
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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391
|
|
|
|
(33
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)
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141
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|
|
|
(39
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)
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(23
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)
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a.
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In December 2016, the Company entered into
a consulting agreement with a consultant ( “Consultant1”) pursuant to which Consultant1 is providing services in connection
with marketing strategies, micro and macro-economic issues and for the promotion of the Company’s marketing, business, products
and operations through smartphone applications. The agreement is for a period of 18 months commencing October 2016.
In consideration for services provided
under the consulting agreement, the Company agreed to issue Consultant1 25,000 shares of common stock of the Company which are
to be issued over six quarters as follows: 4,150 issued over each of the first five quarters and a sixth installment of 4,250 to
be issued on the sixth quarter of the consulting agreement. In addition, the Company has agreed to issue to Consultant1 stock options
to purchase up to 40,000 shares of the Company’s common stock, exercisable not later than March 31, 2018 at an exercise price
of NIS18 per share.
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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.
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b.
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In December 2016, the Company engaged a
consultant (“Consultant2”) to provide services to the Company with respect to marketing strategy and public relations,
including potential investors relations. For such consulting services, the Company agreed to issue to Consultant2 options to purchase
up to 2,000,000 shares of the Company’s common stock at variable exercise prices ranging from $3.50 to $9.00 per share. The
options are exercisable for periods ranging from 12 months (or 6 months from filing date of registration statement) to 36 months.
The issuance of the options under the agreement was subject to the receipt of all the approvals required by the laws applicable
to the Company, including stock exchange approvals and the approval by the Company’s shareholders to adopt an equity incentive
plan for consultants. The equity incentive plan for consultants was approved by the shareholders on March 21, 2017 at the Company’s
Annual Meeting of Stockholders.
On May 16, 2017, the Company and the Consultant2
entered into an amendment to the consulting agreement pursuant to which the strike prices of the options were amended to a range
from $1.50 to $5.00 per share.
Following initial grant, the Company reclassified
the options from equity accounted under ASC 505-50 to derivative liability accounted under ASC 815.
The expense recognize in the second and
third quarters, including the cost associates with the consulting service attributed to the reporting period and the revaluation
of the derivative amounted to $186.
An amount of $88 and $27 was recorded in
the balance sheet as warrants and share based liabilities and share based payments respectively.
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c.
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In April 2017, the Company engaged a consultant (“Consultant3”) to provide services to the
Company with respect to financing and strategic advisory for a period of two years. For such consulting services, the Company agreed
to pay a monthly retainer and to issue to the Consultant3 50,000 shares of the Company common stock and 31,250 shares each quarter
thereafter.
During the nine-month period ended September
30, 2017, costs in the sum of $76 were recorded by the Company as stock-based compensation expense- equity awards.
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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
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a.
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Further to Note 10a to the Annual Report on Form 10-K for the year ended December 31, 2016:
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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.
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b.
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Further to Note 10b to the Annual Report on Form 10-K for the year ended December 31, 2016., The Company
has paid its obligation to the investor in full, As of the date on which the financial statements were signed.
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c.
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Further to Note 10c to the annual report
on Form 10-K for the year ended December 31, 2016: On September 5, 2017, the Court rendered a judgment in the case (the “Judgment”),
under which the complaint against the Company was accepted, the complaint against the CEO Mr. Ronen Luzon was rejected and the
Company’s counter-claim was rejected.
The Judgment included: (1) A declaratory remedy, under which the Company breached
its contractual undertakings toward 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) A rejection of the complaint
against the Company’s CEO Mr. Luzon (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 Judgment 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 Court a Motion for Stay of Execution of the
Judgment, 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 guarantee in an amount of NIS 1,700,000, to cover the respondents’
potential damages should the appeal be ultimately denied.
The Company received legal advice
from its counsel that the burden of proof that the Judgment is wrong and should be reversed lies with the appellant. Consequently,
the Company believes that it is more likely than not that the appeal will be denied rather than being accepted. In the event that
the Appeal is denied, no direct financial liability will be imposed on the Company (other than legal costs which the court may
order the losing side to pay).
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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)
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d.
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On May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company,
filed a motion (the “Motion”) with the Tel Aviv District Court (Financial Division) to approve an action against the
Company as a shareholders’ class action. The subject matter of the action appears to be a report filed by the Company on
April 19, 2017. The Court ordered the Company to respond to the motion by November 15, 2017. The Motion alleges, inter alia,
that the Company’s report date April 19, 2017 regarding its engagement with the Israeli Post was false and misleading, and
that as a result thereof financial damages have been incurred by two purported classes of shareholders: (i) any shareholder who
sold Company’s shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused by such sale
and (ii) any shareholder who held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage caused by permanent
adverse effect to the shares’ value. The alleged financial damage caused to members of both classes is estimated at NIS 18.8
million. The Company reviewed the Motion initially with its legal counsel and retained an expert to review and analyze the allegations
and data upon which the Motion is based. The Company’s management, after considering the conclusions of a report issued by
a third party expert and an opinion of U.S. legal counsel, is of the opinion that the chances that the Class Motion will be denied
exceed the risk that it will be approved. In the event that the Class Motion will be approved, the complaint will become a class
action which will be heard by the Court on its merits. Should this occur, the Company will respond to the Class Motion in the time
frame ordered by the Court.
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Note
6 - Significant Events During the Reporting Period
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a.
|
In February 2017,
the Board of Directors approved agreements with investors that will provide an investment for a total amount of $200 in exchange
for 200,000 shares of common stock of the Company. In addition, the Company will issue warrants exercisable for an aggregate of
250,000 shares of common stock of the Company until December 22, 2017 at an exercise price of $3.50 per share.
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b.
|
On June 5, 2017, the Company received written notice from the Listing Qualifications Department of The NASDAQ Stock Market LLC notifying the Company that for the preceding 30 consecutive business days, the Company’s common stock did not maintain a minimum Market Value of Listed Securities of $35 million (“MVLS Requirement”) per share as required by NASDAQ Listing Rule 5550(b)(2).
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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.
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c.
|
On August 16 2017, the Board of Directors approved agreements with three private investors who will provide investment totaling $780 in exchange for 780,000 shares of common stock of the Company.
|
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)
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d.
|
On September 26, 2017, the Company was notified (the “Notification Letter”) by
The NASDAQ Stock Market, LLC (“NASDAQ”) that it is not in compliance with the minimum bid price requirements
set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on The NASDAQ Capital
Market. NASDAQ Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per
share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement
exists if the deficiency continues for a period of 30 consecutive business days. Based on the closing bid price of the
Company’s common stock for the 30 consecutive business days prior to the date of the Notification Letter, the Company
no longer meets the minimum bid price requirement. The Notification Letter has no immediate effect on the listing or
trading of the Company’s common stock on The NASDAQ Capital Market and, at this time, the common stock will continue to
trade on The NASDAQ Capital Market under the symbol “MYSZ”.
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|
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The Notification
Letter provides that the Company has 180 calendar days, or until March 26, 2018, to regain compliance with NASDAQ Listing
Rule 5550(a)(2). To regain compliance, the bid price of the Company's common stock must have a closing bid price of at least $1.00
per share for a minimum of 10 consecutive business days. If the Company does not regain compliance by March 26, 2018, an additional
180 days may be granted to regain compliance, so long as the Company meets The NASDAQ Capital Market continued listing
requirements (except for the bid price requirement) and notifies NASDAQ in writing of its intention to cure the
deficiency during the second compliance period. If the Company does not qualify for the second compliance period or fails to regain
compliance during the second 180-day period, then NASDAQ will notify the Company of its determination to delist the Company's
common stock, at which point the Company will have an opportunity to appeal the delisting determination to a Hearings Panel.
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|
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The Company
intends to monitor the closing bid price of its common stock and may, if appropriate, consider implementing available options,
including, but not limited to, implementing a reverse stock split of its outstanding securities, to regain compliance with the
minimum bid price requirement under the NASDAQ Listing Rules.
|
Note
7 - Subsequent Events
|
|
On October 26, 2017, My Size, Inc. (the
“Company”) entered into a securities purchase agreement (the “SPA”) 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 the 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 will be 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 are exercisable at a price of $0.75 per share.
|
Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You
should read the following discussion along with our financial statements and the related notes 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” in our annual report on Form 10-K for the year ended December 31, 2016. Our actual results, performance
and achievements may differ materially from those expressed in, or implied by, these forward-looking statements.
Results
of Operations
Nine
and three months ended September 30, 2017 compared to nine and three months ended September 30, 2016
From inception through September 30,
2017, 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 perform further research and
development activities and do not currently have any commercial products. Our product development efforts are still in their early
stages and we are currently unable to estimate the cost or time they will take to complete.
Research and Development Expenses
Our research and development expenses for
the nine months ended September 30, 2017 amounted to $624,000 compared to $500,000 for the nine months ended September 30, 2016.
The increase between the corresponding periods primarily resulted from increased expenses related to subcontractors and the increased
expenses associated with the hiring of new employees.
Our research and development expenses for
the three months ended September 30, 2017 amounted to $213,000 compared to $172,000 for the three months ended September 30, 2016.
The increase between the corresponding periods primarily resulted from increased expenses related to subcontractors and the increased
expenses associated with the hiring of new employees.
Marketing, General and Administrative
Expenses
Our marketing, general and administrative
expenses for the nine months ended September 30, 2017 amounted to $2,667,000 compared to $1,359,000 for the nine months ended September
30, 2016. The increase between the corresponding period 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.
Our marketing, general and administrative
expenses for the three months ended September 30, 2017 amounted to $611,000 compared to $434,000 for the three months ended September
30, 2016. The increase between the corresponding period 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.
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.
Our financial income for the three months
ended September 30, 2017 amounted to $17,000 compared to financial expense of $118,000 for the three 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.
Net Loss from continuing operations
As a result of the foregoing research and
development, marketing general and administrative expenses, and financial expenses, our net loss from continuing operations for
the nine months ended September 30, 2017 was $3,519,000, compared to a net loss from continuing operations for the nine months
ended September 30, 2016 of $4,120,000. The main reasons for the change between the corresponding periods is due to a decrease
in finance expenses mainly from the creation and revaluation of the components of the options, derivatives and investment in marketable
securities 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.
Our net loss from continuing operations
for the three months ended September 30, 2017 was $807,000, compared to a net loss from continuing operations for the three months
ended September 30, 2016 of $724,000. The decrease between the corresponding periods 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.
Liquidity
and Capital Resources
Since inception, we have funded our operations
primarily through private offerings of our equity securities.
As of September 30, 2017, we had cash and
cash equivalents of $14,000 as compared to $34,000 as of December 31, 2016.
Net cash used in operating activities was
$2,472,000 for the nine months ended September 30, 2017 compared to $1,748,000 for the nine months ended September 30, 2016.
The increase in 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 in investing activities
was $8,000 for the nine months ended September 30, 2017 compared to $31,000 for the nine months ended September 30, 2016. The negative
cash flow resulted from purchase of equipment.
Net cash provided by financing activities
was $2,496,000 for the nine months ended September 30, 2017 compared to $1,018,000 for the nine months ended September 30, 2016.
The cash flows from financing activities for the nine months ended September 30, 2017 was mainly due to realization of guarantees.
On August 16, 2017, the Board of Directors
approved agreements with three private investors who will provide an investment totaling $780 in exchange for $780,000 shares of
common stock of the Company.
During August and September 2017, 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 obligation 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, and no shares will be issued on these funds until 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.
Based on the projected cash flows and its
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 are substantial
doubt about the Company’s ability to continue as a going concern.
Management’s plans include the continued
commercialization of their products and securing sufficient financing through the sale of additional equity securities, 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 through the issuance of
equity or debt securities. Even if we are able 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 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 if we are able 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. If additional financing is not
available or is not available on acceptable terms, we will have to curtail our operations.
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. 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.
Equity-based
compensation
The
Company applies ASC 505-50, “Equity-Based Payments to Non-Employees” with respect to options and warrants issued to
non-employees.