My Size, Inc. — FY2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019; filed March 19, 2020. The filing provides annual results, not standalone fourth-quarter results. Financial statement amounts below are in U.S. dollars; financial tables are generally in thousands.
Business context
My Size develops smartphone-based measurement software for online apparel retail, shipping and parcel services, and DIY uses. Its products include MySizeID, BoxSize, SizeUp and the underlying SizeIT technology. The company said it was in the commercialization phase, with a U.S.-focused B2B2C strategy and minimal revenue to date.
Key financial results
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | $63,000 | $0 |
| Cost of revenue | $21,000 | $0 |
| Gross profit / gross margin | $42,000 / 66.7% | $0 |
| Research and development | $1.516 million | $1.105 million |
| Sales and marketing | $1.929 million | $899,000 |
| General and administrative | $2.587 million | $3.171 million |
| Operating loss | $5.990 million | $5.175 million |
| Net loss | $5.497 million | $5.969 million |
| Net cash used in operating activities | $5.418 million | $3.597 million |
Revenue began in 2019, primarily from pilot and SaaS agreements. Sales and marketing expense rose 115% and R&D rose 37%, while G&A declined 18%, mainly due to lower stock-based compensation. The operating loss widened 16%; the net loss narrowed, largely because of a favorable change in warrant revaluation and other financial items, rather than improved operating performance.
Financial position and liquidity
- At December 31, 2019, cash and cash equivalents were $1.203 million and restricted cash was $263,000; combined cash and restricted cash was $1.466 million, down from $5.230 million a year earlier. Current assets were $1.825 million and current liabilities $1.248 million.
- Total assets were $2.958 million, total liabilities $1.907 million, and shareholders’ equity $1.051 million. Accumulated deficit was $28.514 million.
- No material interest-bearing debt was reported at year-end. Operating lease liabilities totaled $761,000, including $102,000 current and $659,000 non-current.
- Management estimated existing cash would fund obligations only through August 2020 and disclosed substantial doubt about the company’s ability to continue as a going concern. The auditor’s report included a going-concern explanatory paragraph.
- In January 2020, the company raised $2.0 million gross, or $1.7 million net, through an offering of shares and warrants. The 2019 ATM generated approximately $419,000 net; its prospectus supplement was terminated in January 2020, while the sales agreement remained in force.
Outlook, developments and risks
- Management did not expect meaningful revenue in the upcoming quarters, citing customer integration, piloting and rollout lead times. It expected R&D expense to continue increasing in 2020 and anticipated recruiting additional employees.
- The company cited commercial deployments and partnerships, including MySizeID agreements and integrations, Shopify, WooCommerce and Lightspeed availability, and BoxSize approval for Honeywell’s vendor program. It also said the Katz rollout was progressing, while noting no material revenue had yet come from the Katz agreement.
- COVID-19 was identified as a risk to operations, sales and marketing, workforce activity and access to capital; the extent and duration of its effects were uncertain.
- Nasdaq had confirmed the company regained minimum-bid-price compliance, but granted an extension through May 18, 2020 to demonstrate compliance with the $2.5 million stockholders’ equity requirement. A 1-for-15 reverse stock split took effect in November 2019.
- The company is pursuing litigation against North Empire seeking damages of at least $616,000; North Empire asserted counterclaims of approximately $10.96 million. The company said it believed the counterclaims were more likely than not to be dismissed; the related third-party complaint against the CEO and former chairman was dismissed in January 2020. The filing does not provide a clear estimate of potential loss.
- Other significant risks include recurring losses and financing needs, uncertain customer adoption and long sales cycles, potential dilution from future securities issuance and warrants, data privacy and cybersecurity obligations, competition, and dependence on key technology assets. The asset purchase agreement with a related party includes an 18% operating-profit payment and potential repurchase rights under specified conditions.
Important facts for investors to verify
- Latest cash position, actual cash burn, subsequent financing, and whether liquidity extends beyond management’s August 2020 estimate.
- Whether customer pilots and integrations convert into scaled deployments and material recurring revenue.
- Nasdaq compliance status after the May 18, 2020 extension and the effect of the reverse split and future share or warrant issuance on dilution.
- Subsequent developments in the North Empire litigation and any reasonably estimable exposure.
- Actual operational and financial effects of COVID-19, and whether reported financial income from warrant revaluation recurs.