My Size, Inc. — FY2018 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2018. This is an annual filing, not a separate fourth-quarter report. Financial statement amounts below are in U.S. dollars; unless otherwise stated, figures are in millions.
Business context
My Size develops smartphone-based measurement software for online apparel sizing, parcel measurement and do-it-yourself applications. Its products include MySizeID, BoxSizeID, SizeUp and the underlying SizeIT technology. The company was focused on commercial adoption, particularly by U.S. retailers; it described its market as new and unproven and reported limited sales to date.
Financial performance and position
| Metric | FY2018 | FY2017 | Change / context |
|---|---|---|---|
| Revenue | Not clearly stated in the provided results table | Not clearly stated | Management described revenues as minimal; Katz agreement had generated no material revenue. |
| Research and development expense | $1.105 | $0.845 | Up 30.7%; management expected further increase in 2019. |
| Marketing, general and administrative expense | $4.070 | $4.765 | Down 14.5%, including lower share-based compensation and professional and investor-relations costs; marketing expense increased. |
| Operating loss | $5.175 | $5.610 | Improved 7.7%. |
| Financial income (expense), net | $(0.794) | $0.206 | Shifted to expense, primarily reflecting warrant fair-value changes. |
| Net loss | $5.969 | $5.404 | Loss increased 10.5%; basic and diluted loss per share was $0.20 versus $0.30. |
| Net cash used in operating activities | $3.597 | $4.140 | Operating cash use declined. |
| Cash, cash equivalents and restricted cash | $5.230 | $1.872 | Year-end cash-flow statement balance. |
| Current assets / current liabilities | $6.838 / $1.823 | $2.253 / $3.570 | Working capital improved substantially; current ratio was approximately 3.75. |
| Total liabilities / shareholders’ equity | $1.823 / $5.294 | $3.570 / $(1.152) | No short-term loan remained at year-end 2018; equity turned positive. |
Cash, cash equivalents and restricted cash totaled $5.230 million; the balance sheet separately reported $1.209 million in short-term deposits and $0.181 million in restricted deposits. Operating cash outflow was funded principally by $9.040 million of financing cash flow, including a February 2018 offering and warrant exercises. The company reported no material capital-expenditure commitments. It stated that available cash and deposits were expected to fund obligations for more than 12 months from the filing date, while also saying additional capital would be needed to meet future business objectives.
No revenue or gross-margin figure is clearly provided in the supplied results discussion, so revenue growth and operating margins cannot be assessed from the disclosed figures here.
Material changes and notable items
- February 2018 public offering produced approximately $5.464 million in net proceeds. Warrant exercises generated additional proceeds; shares outstanding rose to 29,852,389 by March 1, 2019, from 22,238,745 at year-end 2017.
- Financial results included material non-cash fair-value effects from warrants and other instruments. Warrant revaluation contributed to the swing from net financial income in 2017 to net financial expense in 2018.
- The company early adopted ASU 2018-07 for nonemployee share-based compensation in October 2018, reclassifying $0.284 million from liabilities to equity.
- Management reported effective disclosure controls and effective internal control over financial reporting at year-end. The auditor did not provide an internal-control attestation.
Outlook, risks and contingencies
- Management planned to invest further in research and development, recruit additional employees and pursue retailer and platform adoption. MySizeID became available to Shopify retailers in February 2019, and BoxSizeID became available on the Honeywell Marketplace.
- Commercialization remained uncertain: the company had limited operating history in measurement technology, minimal revenues, long and unpredictable sales cycles, and dependence on customer adoption and third-party platforms.
- Management cited funding needs and potential dilution as key risks. Outstanding warrants, options, and warrant price-protection provisions could affect ownership and future financing.
- The measurement-technology assets acquired from related party Shoshana Zigdon are material to the business. The agreement provides for 18% of related operating profit for seven years after development; a repurchase right may arise in specified circumstances, including if related income falls below NIS 3.6 million at the applicable seventh anniversary.
- In a New York dispute, My Size sought at least $616,000 from North Empire; North Empire counterclaimed for $10.959 million and brought related claims against the CEO and board chairman. The company said counsel believed the counterclaims were more likely than not to be dismissed; the outcome remained unresolved.
- A separate Israeli shareholder class action concerning a 2017 company report was dismissed with prejudice in November 2018. Other disclosed shareholder matters were settled or resolved, including a payment of approximately $62,000 in March 2018 under one settlement.
- Nasdaq notified the company in January 2019 of a minimum-bid-price deficiency, with a stated deadline of July 22, 2019 to regain compliance. Delisting could reduce liquidity and impair access to capital.
- Other material risks include data privacy and cybersecurity, GDPR compliance, competition, intellectual-property protection, operations in Israel and regional security conditions, and possible future equity financing.
Important facts for investors to verify
- Actual FY2018 and subsequent revenue, customer counts, paid usage, renewals, and revenue concentration; the filing does not provide a clear FY2018 revenue figure in the results table.
- Cash availability and runway, distinguishing unrestricted cash from restricted cash and deposits, and progress toward any further financing.
- Nasdaq bid-price compliance status and any resulting effects on trading liquidity or financing.
- Current status and potential exposure of the North Empire litigation and the terms and continuing implications of the Zigdon asset agreement.
- Potential dilution from warrants, options, equity compensation, and anti-dilution provisions, alongside the company’s ability to convert product adoption into recurring revenue.