My Size, Inc. — Form 10-Q Summary
Reporting period: Quarter and six months ended June 30, 2015; filed August 19, 2015. Unaudited figures are in U.S. dollars, thousands, except per-share data. The company is developing a mobile application to help consumers measure their bodies for clothing fit. It reported no revenue and stated it had not generated revenue since inception.
Financial performance and liquidity
| Metric | Three months ended June 30, 2015 | Six months ended June 30, 2015 |
|---|---|---|
| Revenue | None reported | None reported |
| Operating expenses | $527 | $869 |
| Operating loss | $(527) | $(869) |
| Net loss from continuing operations | $(893) | $(1,257) |
| Net loss per share, basic and diluted | $(0.06) | $(0.08) |
| Financial expense, net | $(366) | $(388) |
| Comprehensive loss | $(904) | $(1,275) |
Six-month operating expenses included research and development of $105, marketing of $382, and general and administrative expenses of $382. With no revenue, gross margin and operating margin are not meaningful.
Operating cash use was $597 for the six months, versus $270 in the comparable 2014 period. Investing cash use was $14; financing provided $525. Cash declined by $100 during the period, from $645 at year-end 2014 to $545 at June 30, 2015.
At June 30, 2015, current assets were $620 and current liabilities $1,253, including $492 of short-term convertible loans. Working capital was therefore negative $633. Total assets were $656, liabilities $1,253, and stockholders’ equity was a deficit of $597. No long-term debt amount is reported.
Changes from comparable periods
- Six-month net results shifted from income of $69 in 2014 to a loss of $1,257 in 2015. Management attributed the change principally to the start of research, development, and marketing activities, and to higher financial expense.
- Six-month operating expenses rose from $186 to $869. Marketing and R&D had no expense in the 2014 comparison; G&A increased from $186 to $382.
- Financial results changed from $46 of net financial income in the first half of 2014 to $388 of net financial expense in 2015. Management said the increase was primarily due to option valuation.
- Cash at June 30 was $545, compared with $4 at June 30, 2014; the balance-sheet comparison date is different from the December 31, 2014 balance used above.
Financing, outlook, and risks
The company entered into agreements for convertible financing and warrants totaling $4.025 million. The loans are described as non-interest-bearing, with an eight-month term, conversion at $3.50 per share at the investor’s option, and automatic conversion if the company lists on a U.S. national securities exchange. Associated warrants have a $4.50 exercise price and an 18-month term. By June 30, the company reported receipt of $525; it reported further receipts after period-end, including $1.5 million in cash and $2 million in Diamante Minerals public stock. The filing’s descriptions of timing and consideration merit review.
Management disclosed substantial doubt about the company’s ability to continue as a going concern, citing recurring losses and negative operating cash flow. Continued operations depend on raising additional funds; the filing gives no assurance that sufficient financing will be available. No quantified revenue or earnings guidance is provided, and management cautions that interim results are not necessarily indicative of full-year results.
Key risks include financing availability and potential dilution, the early-stage product and absence of revenue, execution and commercialization, currency exposure, and the company’s ability to maintain public-company compliance. The filing also identifies a $72,000 investor lawsuit seeking repayment of an earlier loan; the company disputes the claims. A separate $1.4 million claim was described as a letter, with counsel believing it lacked merit; no provision was recorded. The company reported no other pending proceedings believed by management to be material.
Important facts for investors to verify
- Financing actually received after June 30, including whether the reported $2 million in Diamante Minerals stock was received and how it was valued and made available to fund operations.
- Cash runway, near-term obligations, and the plan and ability to secure further capital given the disclosed going-concern doubt and negative working capital.
- Convertible-loan and warrant accounting, conversion triggers, potential dilution, and the amounts recognized as loans and derivative liabilities.
- The MD&A describes marketing and G&A figures inconsistently: it gives $382 for each, while the financial statements report marketing of $382 and G&A of $382, in addition to R&D of $105. Clarify expense classification and explanations.
- The filing reports $200 of stock-based compensation in the equity statement but $96 in the note’s six-month expense table; reconcile the amounts and classifications.
- Progress toward product commercialization, customer adoption, and revenue generation; the filing provides no revenue or quantified operating guidance.