Business Context and Reporting Period
This Form 8-K Current Report was filed by My Size, Inc. on October 3, 2018, regarding events occurring on September 27, 2018. The filing addresses ongoing litigation between the Company and North Empire LLC concerning convertible notes and the issuance of common stock.
Key Financial Metrics
The filing does not provide standard financial metrics such as revenue, profit, cash flow, margins, or liquidity ratios. The only financial figures disclosed relate to the specific legal dispute:
- Outstanding Balance Claimed by Company: $616,000 (portion of a $1,450,000 convertible note purchase price allegedly unpaid by North Empire).
- Counterclaim Damages Sought by North Empire: At least $10,958,589, plus interest and legal fees.
Material Changes and Legal Proceedings
The primary material event is the escalation of litigation initiated by the Company on August 7, 2018.
- Company's Position: My Size, Inc. alleges North Empire failed to pay the full $1,450,000 purchase price for a convertible note issued in December 2015, with $616,000 remaining due.
- North Empire's Response: On September 27, 2018, North Empire filed an answer and counterclaims. They allege the Company delayed issuing shares upon the automatic conversion of notes (including a March 2015 note for $1,000,000) after the Company's securities were listed on a U.S. exchange.
- Third-Party Claims: North Empire filed a third-party complaint against CEO Ronen Luzon and Chairman Eli Walles in their individual capacities, alleging improper delay in share delivery caused damages.
Management Commentary and Risks
Management states that the Company intends to vigorously pursue its complaint for the unpaid balance and defend against North Empire's counterclaims, which the Company believes are without merit. Similarly, the individual defendants (CEO and Chairman) intend to vigorously defend against the third-party claims. The filing highlights the risk of significant financial liability if the counterclaims are successful, though no specific financial impact on the current period is quantified beyond the claimed damages.
Investor Verification Checklist
- Verify the status of the $616,000 receivable from North Empire and its classification on the balance sheet.
- Confirm the total outstanding debt obligations related to the March 2015 and December 2015 convertible notes.
- Assess the potential dilution impact if the notes are converted into common stock as alleged by North Empire.
- Review the Company's legal reserves and insurance coverage regarding the $10.9 million+ counterclaim.
- Monitor future court filings for updates on the litigation timeline and potential settlement discussions.