My Size, Inc. — 2016 Form 10-K
Reporting period: Fiscal year ended December 31, 2016. Although the request references 2016 Q4, this is an annual report; it does not provide a clear standalone fourth-quarter financial summary. Financial figures below are in U.S. dollars unless otherwise noted.
Business context
My Size develops smartphone-based measurement applications, principally for online apparel sizing, as well as courier and do-it-yourself uses. Its products included the developing MySizeID and TrueSize apparel solutions, BoxSizeID for parcel measurement, and the free SizeUp tape-measure app. The company remained pre-revenue and described its business as dependent on successful product development and commercial adoption.
Financial performance and position
| Metric | 2016 | 2015 |
|---|---|---|
| Revenue | No recurring revenue generated | No recurring revenue generated |
| Research and development expense | $727,000 | $301,000 |
| Marketing, general and administrative expense | $1.859 million | $1.594 million |
| Total operating expenses / operating loss | $2.586 million | $1.895 million |
| Net loss | $4.334 million | $3.437 million |
| Net loss per share, basic and diluted | $0.27 | $0.22 |
| Net cash used in operating activities | $2.159 million | $1.439 million |
Operating margins are not meaningful because the company reported no revenue. Total assets were $2.150 million versus $3.738 million; total liabilities were $625,000 versus $6.351 million; and shareholders’ equity was $1.525 million versus a $2.613 million deficit. Year-end cash and equivalents fell to $34,000 from $919,000. Current assets were $1.497 million and current liabilities $625,000, but current assets included $1.339 million of receivables on account of shares. The company also held $579,000 of Diamante Minerals (DIMN) securities, whose value was subject to market-price risk.
There were no short-term convertible loans on the year-end balance sheet; convertible loans totaling $7.320 million had converted into equity following Nasdaq listing. Financing cash flow was positive $1.314 million, while investing cash flow was negative $36,000. The filing does not present a clear figure for interest-bearing debt outstanding at year-end.
Changes versus 2015
- Net loss increased by $897,000, approximately 26%, as operating expenses and net financial expense rose.
- R&D expense increased by $426,000, reflecting greater development activity, subcontractor costs and hiring. Management expected R&D spending and staffing to increase further in 2017.
- Operating cash use rose by $720,000, primarily due to higher payments to employees and service providers.
- Cash and equivalents declined by $885,000. Equity improved from a deficit to positive equity, principally following conversion of financing into shares after the Nasdaq listing.
- Financial expense, net increased to $1.748 million from $1.542 million. Notable 2016 items included a $776,000 expense related to DIMN put options and a $1.233 million decline in the value of DIMN shares; these valuation-related items affected reported results.
Outlook, risks and contingencies
- Management expected committed investments to fund operations for 12 months following approval of the financial statements, relying on collection of investor commitments, sale of marketable securities and additional fundraising. It warned that failure to collect commitments could raise doubt about the company’s ability to continue as a going concern. Some promised funding was represented by guarantee notes and checks; the guarantor was described as an ungraded financial institution. The company reported subsequent cash collections, but collection risk remained.
- The Trucco/IN SITU project was in development, with launch expected in Q2 2017; the filing says success was substantially dependent on this relationship and project milestones. My Size hoped to begin courier-related revenue in the second half of 2017, but payment terms with Katz were still under negotiation. These are expectations, not assured outcomes.
- The company reported more than 200,000 SizeUp downloads through February 2017. It planned, but had not implemented, charging users after a 30-day free period.
- Significant execution risks include remaining pre-revenue, ongoing losses and funding needs, competition, product delays or lack of adoption, dependence on third-party app distribution, cybersecurity and privacy exposure, and dependence on acquired technology rights. A related-party agreement provides the seller 18% of operating profit connected to the venture and includes specified asset repurchase rights.
- Material legal matters include shareholder claims concerning registration of shares for trading, including one case in mediation and another awaiting judgment; a separate claim had an asserted amount of about $1.4 million, which the company disputed. A settlement of a prior loan claim required an additional NIS 50,000 payment that remained unpaid as of the report date. The filing describes the company’s estimates and competing damages opinions; outcomes remain uncertain.
Important facts for investors to verify
- Whether the disclosed investor commitments, guarantee notes and checks were collected, and how much unrestricted cash was available after the reporting date.
- Current cash runway, subsequent financing requirements and the assumptions supporting management’s 12-month funding estimate.
- Whether Trucco, Katz and other commercial pilots reached launch, generated revenue or established payment terms.
- The current status and potential exposure of the shareholder litigation, including any changes in claimed damages or settlements.
- The value and liquidity of the DIMN holding and any further effects of its valuation on earnings or cash resources.
- The cover page marks the company as a shell company, while the filing narrative describes active product-development operations; investors should clarify this classification and its implications.
The independent auditor issued an unqualified opinion on the 2016 financial statements. Management reported effective disclosure controls and internal control over financial reporting; the auditor did not provide an internal-controls attestation.