My Size, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2015; financial results also cover the nine months ended that date. Amounts are in U.S. dollars in thousands, except per-share data. Statements are unaudited.
Business context and results
The company is developing a mobile application intended to help consumers measure their bodies for clothing fit. It reported no revenue and said it had generated no revenue since inception. The filing describes the company as dependent on additional financing to fund operations.
| Metric | Three months ended Sep. 30, 2015 | Nine months ended Sep. 30, 2015 | Comparable 2014 period |
|---|---|---|---|
| Revenue | None reported | None reported | None reported |
| Operating expenses | $476 | $1,345 | $246 quarter; $432 nine months |
| Operating loss | $(476) | $(1,345) | $(246) quarter; $(432) nine months |
| Financial income (expense), net | $(1,138) | $(1,526) | $(41) quarter; $5 income nine months |
| Net loss from continuing operations | $(1,614) | $(2,871) | $(287) quarter; $(218) nine months |
| Comprehensive loss | $(2,174) | $(3,449) | $(302) quarter; $(193) nine months |
| Basic and diluted loss per share | $(0.11) | $(0.19) | $(0.02) in each comparable period |
Margins are not meaningful because the company reported no revenue. Nine-month R&D expense was $217 versus $128 in 2014; marketing was $577 versus none; and general and administrative expense was $551 versus $304. Management attributed the G&A increase partly to U.S. listing-related professional fees. Financial expense was driven primarily by option valuation, according to management.
Cash flow, liquidity and capital
- Cash and cash equivalents: $1,629 at September 30, 2015, compared with $645 at December 31, 2014 and $967 at September 30, 2014.
- Nine-month cash flows: $913 used in operations, $21 used in investing, and $1,937 provided by financing; cash increased by $984 during the period.
- Balance sheet: Current assets were $4,048 and current liabilities were $6,713, implying a $2,665 working-capital deficit. Total assets were $4,087 and stockholders’ equity was a $2,626 deficiency.
- Debt and related liabilities: Current short-term convertible loans were $3,043. The balance sheet also included $1,483 of embedded-conversion derivative liabilities and $1,992 of warrant liabilities.
- Current assets included $1,266 of marketable securities and a $1,033 DIMN-share put-option asset. The company reported a $600 unrealized loss on available-for-sale securities in other comprehensive loss.
Material changes and unusual items
- Nine-month net loss increased to $2,871 from $218 in 2014, reflecting higher operating expenses and a $1,526 financial expense, versus $5 of financial income in the prior period.
- The company entered into convertible-loan arrangements in 2015. One arrangement involved $2,025 in cash consideration; another involved a stated $2,000 consideration in DIMN public shares. The notes describe conversion terms and warrants, and report that 3,616,667 DIMN shares were received in August. The filing’s accounting allocations and related balance-sheet amounts are complex; the exact relationship among stated consideration, cash proceeds, and carrying values should be checked in the notes.
- Stock-based compensation of $345 was recognized for consultant options. The filing also reports substantial fair-value changes in warrants and embedded conversion options.
- The company reported 15,313,793 common shares outstanding at November 16, 2015. Basic and diluted weighted-average shares were 15,313,798 for the 2015 periods; options and warrants were excluded from diluted loss per share as anti-dilutive.
Outlook, risks and contingencies
No quantified revenue, earnings, or cash-flow guidance was provided. Management stated that continued operations depend on raising additional funds and gave no assurance that adequate financing will be available. The notes cite substantial doubt about the company’s ability to continue as a going concern, based on recurring losses and negative operating cash flow; the statements include no adjustments that might be required if the company could not continue as a going concern.
Risks highlighted include financing availability and potential dilution, product and market acceptance, competition, intellectual-property protection, dependence on key personnel, public-company compliance costs, and stock-price volatility. The company said disclosure controls were effective at September 30, 2015 and reported no material change in internal control over financial reporting during the quarter.
Legal matters included a shareholder claim related to registration of shares on the Tel Aviv Stock Exchange, which was dismissed on September 10, 2015; a separate investor loan-repayment claim for which the company was permitted to defend itself after depositing a 60% guarantee, with the outcome not assessable at the filing date; and claims and countersuits concerning shares issued in connection with the Metamorefix transaction. The company said it could not assess the chances of the latter claims.
Most important facts for investors to verify
- Cash runway, expected operating needs, and whether additional financing has since been secured.
- The terms, maturity, conversion mechanics, and accounting of the convertible loans, warrants, embedded derivatives, and DIMN-related put option.
- The valuation and liquidity of the DIMN securities and the impact of their fair-value changes on reported results and equity.
- Current status and potential financial exposure from the disclosed lawsuits and countersuits.
- Product-development and commercialization progress, given the absence of revenue and management’s stated going-concern uncertainty.