My Size, Inc. — Form 10-Q Summary
Business context and reporting period. This unaudited report covers the three and six months ended June 30, 2017. My Size develops measurement technology for applications including apparel e-commerce and smartphone and tablet apps. The company reported that it had no commercial products and had generated no operating revenue since inception.
Financial performance
Amounts below are in U.S. dollars in thousands, except per-share data. Margins are not meaningful because the company reported no revenue.
| Metric | Q2 2017 | Q2 2016 | H1 2017 | H1 2016 |
|---|---|---|---|---|
| Revenue | None | None | None | None |
| Research and development | 204 | 151 | 411 | 328 |
| Marketing, general and administrative | 1,177 | 599 | 2,056 | 925 |
| Total operating expenses / operating loss | 1,381 | 750 | 2,467 | 1,253 |
| Financial income (expenses), net | 63 | (2,757) | (245) | (2,143) |
| Net loss from continuing operations | (1,318) | (3,507) | (2,712) | (3,396) |
| Basic and diluted loss per share | (0.07) | (0.23) | (0.15) | (0.22) |
Liquidity and financial position
- At June 30, 2017, cash and cash equivalents were $128,000; current assets were $417,000; marketable securities were $308,000; total assets were $799,000.
- Current liabilities were $1.256 million, including $248,000 of derivative liabilities and $308,000 of warrants and share-based liabilities. Stockholders’ equity was a deficit of $457,000. The balance sheet does not show a separate conventional debt balance.
- For H1 2017, operating cash use was $1.945 million, investing cash use was $7,000, and financing cash provided was $2.005 million, primarily from realization of guarantees. Cash ended the period at $128,000.
- The accumulated deficit was approximately $14.3 million. The filing reports no operating cash generation and ongoing operating losses.
Material changes versus comparable periods
- H1 operating expenses nearly doubled year over year, driven by higher R&D subcontractor and employee costs, and higher marketing, general and administrative costs, including share-based compensation, public and investor relations, and salaries.
- H1 net loss narrowed to $2.712 million from $3.396 million, primarily because financial expenses were lower; Q2 net loss narrowed to $1.318 million from $3.507 million. These improvements do not reflect operating revenue: operating expenses increased in both periods.
- Management attributed the change in financial results mainly to the creation and revaluation of options, derivatives, and marketable securities. The filing also reports a $340,000 H1 adjustment for revaluation of marketable securities in the cash-flow reconciliation.
- Cash increased from $34,000 at December 31, 2016 to $128,000 at June 30, 2017, while total assets fell from $2.150 million to $799,000 and equity moved from $1.525 million to a $457,000 deficit.
Outlook, risks, contingencies, and unusual items
- Funding and going concern: Management said committed investments were expected to fund operations for 12 months following approval of the financial statements, but collection, additional financing, and sale of the company’s DIMN shares were uncertain. The filing states that failure to obtain or replace the funding creates significant doubt about the company’s ability to continue as a going concern and could require curtailed operations. No financial-statement adjustments for a potential failure to continue as a going concern were made.
- Funding commitments: The company disclosed $738,000 in guarantee notes and $455,000 in checks outstanding as of the report date; $151,000 of guarantee notes was redeemed after quarter-end. On August 16, 2017, the board approved $780,000 of investment agreements for 780,000 shares; $200,000 had been received by the report date, with the balance described as cash and guarantee notes. Collection and timing remain important uncertainties.
- NASDAQ listing: On June 5, 2017, the company received notice that its market value of listed securities had been below the $35 million requirement for 30 consecutive business days. It had until December 4, 2017 to regain compliance.
- Legal matters: A June 2017 settlement of a share-registration lawsuit requires a NIS 325,000 payment, registration of shares, and issuance of 80,358 additional shares. If proceeds from sale of the original and new shares are below NIS 1.6 million, the company must make up the shortfall in cash or shares. Separately, a proposed Israeli shareholder class action alleges misleading disclosure concerning an Israeli Post engagement and claims estimated damages of NIS 18.8 million. The company said it could not assess the motion’s chances at that preliminary stage.
- Equity-linked compensation: The company recorded stock-based compensation and share-based liabilities, including consulting arrangements and options; the filing describes variable exercise prices and derivative-liability accounting for certain options. Such valuations affect reported expenses and liabilities.
- Management reported that disclosure controls were effective at June 30, 2017 and that no material change in internal control over financial reporting occurred during the quarter. No formal revenue or earnings guidance is provided.
Investor facts to verify
- Whether outstanding investor commitments, guarantee notes, and checks were collected, and whether the subsequent $780,000 financing was completed as planned.
- Current cash runway, operating cash burn, and any additional financing needed to avoid curtailing operations.
- Progress toward the NASDAQ market-value requirement and the status of listing compliance.
- Status and potential financial exposure of the proposed class action and whether the settlement obligations, including any share issuance or proceeds shortfall, were satisfied.
- Liquidity and realizable value of the DIMN shares, along with the effect of securities and derivative revaluations on future reported results.