My Size, Inc. — 2017 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2017. This is an annual report, not a separate fourth-quarter report. Unless otherwise noted, financial amounts below are U.S. dollars in thousands.
Business context
My Size develops smartphone-based measurement technology for apparel e-commerce, parcel shipping and do-it-yourself applications. Its products include MySizeID, TrueSize, BoxSizeID, SizeUp and the SizeIT software development kit. The company described itself as pre-revenue, with only minimal revenue to date; the filing does not provide a clear revenue amount for 2017 or 2016.
MySizeID was in development; its first beta was demonstrated at CES in January 2018. SizeUp had more than 750,000 downloads as of March 19, 2018, but paid-download revenue was described as immaterial. The company’s proposed MySizeID transaction fee of 1%–3% was an anticipated model, not a disclosed realized rate.
Financial results and liquidity
| Metric | 2017 | 2016 |
|---|---|---|
| Revenue | Not clearly quantified; described as minimal | Not clearly quantified |
| Research and development expense | $845 | $727 |
| Marketing, general and administrative expense | $4,765 | $1,859 |
| Total operating expenses and operating loss | $5,610 | $2,586 |
| Net loss | $5,404 | $4,334 |
| Basic and diluted loss per share | $0.30 | $0.27 |
| Net cash used in operating activities | $3,817 | $2,159 |
| Cash and cash equivalents at year-end | $1,802 | $34 |
| Total assets | $2,418 | $2,150 |
| Total liabilities | $3,570 | $625 |
| Shareholders’ equity (deficit) | $(1,152) | $1,525 |
Gross margin is not meaningful based on the filing’s description of the company as pre-revenue; no clear revenue or gross-profit figures are provided. Year-end current assets were $2,253 versus current liabilities of $3,570, implying a working-capital deficit of approximately $1,317. The balance sheet included a $558 short-term loan and $2,431 of warrant, derivative and stock-based compensation liabilities. The loan was repaid after year-end, according to the filing.
Financing activities provided net cash of $5,609 in 2017, compared with $1,314 in 2016; investing activities used $16 and $36, respectively. The December 2017 public offering raised approximately $2,490 gross and $2,130 net. The company reported approximately $8,900 of additional proceeds after year-end from securities exercises and equity sales, including a February 2018 offering that generated $6,000 gross and about $5,400 net. Management said these proceeds, together with available cash, were expected to fund obligations for more than 12 months from the filing date.
Material changes and unusual items
- Net loss increased by $1,070, or about 25%, while operating expenses rose by $3,024. Management attributed the increase chiefly to product development, hiring, marketing and public/investor relations.
- Marketing, general and administrative expense included $1,558 of share-based payment expense in 2017, versus a $23 benefit in 2016. The filing also reports total stock-based compensation of $1,629 for 2017 across expense categories.
- Net financial income was $206 in 2017, versus net financial expense of $1,748 in 2016. The comparison was affected by fair-value changes in warrants and derivatives, loan costs and losses on the company’s Diamante Minerals investment. That investment was valued at $98 at year-end, after a reported $623 decline in value during 2017.
- The December 2017 financing included warrants classified as liabilities and subject to price-protection provisions; subsequent financing or exercises can affect dilution and reported fair values. The company issued 3,832,500 shares and warrants to purchase up to 2,874,375 shares in that offering.
- The company reported no impairment losses on property and equipment. Its auditor issued an unqualified opinion on the consolidated financial statements; the auditor did not attest to internal-control effectiveness. Management concluded its controls were effective.
Outlook, risks and contingencies
Management expected research and development spending to increase in 2018 and anticipated hiring additional employees. The company’s commercialization plans rely on product development, retailer adoption, partnerships and further financing. It warned that it may be unable to commercialize products, generate meaningful revenue or obtain capital on acceptable terms; failure could require it to curtail development or cease operations.
- Commercial and technology risk: Products remain early-stage, market acceptance is unproven, and competitors may have substantially greater resources. Revenue plans and pricing are prospective, not established results.
- Financing and dilution: The company has accumulated losses and negative operating cash flow. Equity and warrant exercises may dilute existing shareholders; the company said further financing could be needed.
- Intellectual property and related-party agreement: The business depends substantially on assets acquired from Shoshana Zigdon. The agreement provides for 18% of related operating profit and possible asset repurchase under specified conditions, including a revenue threshold after seven years.
- Legal matters: A proposed Israeli shareholder class action alleged misleading statements concerning an Israeli Post engagement, with claimed damages of NIS 18.8 million; the motion to dismiss was pending, with a hearing scheduled for April 2018. In a separate share-registration dispute, a judgment against the company was on appeal; the filing cites a possible, unfiled damages claim and states that its financial exposure could not be assessed. Another shareholder dispute was settled: after share-sale proceeds fell below the agreed threshold, the company paid an additional NIS 213,467 in March 2018.
- Listing and operating risks: Nasdaq bid-price and market-value deficiencies were reported cured in January 2018, but continued listing was not assured. Other disclosed risks include reliance on app stores and cloud providers, privacy and cybersecurity exposure, Israeli political and economic conditions, foreign-currency movements, and limited trading liquidity.
Important facts for investors to verify
- Actual recognized revenue, paying customers, commercial deployments and cash receipts by product; the filing does not clearly quantify annual revenue.
- Cash runway after year-end financing, warrant and option exercises, loan repayment, settlement payments and ongoing operating cash use.
- The full dilution impact of outstanding shares, warrants and options, including price-protection terms and subsequent exercises.
- Current status and potential financial exposure of the Israeli litigation and the Zigdon asset agreement, including any repurchase trigger or profit-sharing obligation.
- Evidence of product accuracy, retailer integration, customer retention and conversion of downloads or pilots into recurring revenue.