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EX-10.2 - EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND OR KLES DATED NOVEMBER 18, 2018 - My Size, Inc.f10q0918ex10-2_mysizeinc.htm
EX-32.2 - CERTIFICATION - My Size, Inc.f10q0918_ex32-2mysizeinc.htm
EX-32.1 - CERTIFICATION - My Size, Inc.f10q0918_ex32-1mysizeinc.htm
EX-31.2 - CERTIFICATION - My Size, Inc.f10q0918_ex31-2mysizeinc.htm
EX-31.1 - CERTIFICATION - My Size, Inc.f10q0918_ex31-1mysizeinc.htm
EX-10.4 - EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND ELIYAHU WALLES DATED NOVEMBER 18, 2 - My Size, Inc.f10q0918ex10-4_mysizeinc.htm
EX-10.3 - EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND BILLY PARDO DATED NOVEMBER 18, 2018 - My Size, Inc.f10q0918ex10-3_mysizeinc.htm
EX-10.1 - EMPLOYMENT AGREEMENT BETWEEN THE COMPANY AND RONEN LUZON DATED NOVEMBER 18, 2018 - My Size, Inc.f10q0918ex10-1_mysizeinc.htm

 

 

U. S. Securities and Exchange Commission

Washington, D. C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2018

 

TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _________ to _________

 

Commission File No. 001-37370

 

MY SIZE, INC.

(Exact name of registrant as specified in its charter)

 

Delaware   51-0394637
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
I.D. No.)

 

3 Arava St., pob 1026, Airport City, Israel, 7010000

(Address of principal executive offices)

 

+972-3-600-9030

Registrant’s telephone number, including area code:

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒   No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)  Yes ☒   No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
    Emerging growth company

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)  Yes ☐   No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of November 16, 2018, 29,852,389 shares of common stock, par value $0.001 per share were issued and outstanding.

 

 

 

 

 

  

MY SIZE, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2018

 

TABLE OF CONTENTS

 

    PAGE
PART I - FINANCIAL INFORMATION  1
     
Item 1. Condensed Consolidated Interim Financial Statements (Unaudited) 1
  Condensed Consolidated Interim Balance Sheets 3
  Condensed Consolidated Interim Statements of Comprehensive Loss 4
  Condensed Consolidated Interim Statements of Changes in Stockholders’ Equity (Deficit) 5
  Condensed Consolidated Interim Statements of Cash Flows 6
  Notes to Condensed Consolidated Interim Financial Statements 7
Item 2. Management’s Discussion & Analysis of Financial Condition and Results of Operations 16
Item 3. Quantitative and Qualitative Disclosure About Market Risk 19
Item 4. Controls and Procedures 19
   
PART II - OTHER INFORMATION 20
     
Item 1. Legal Proceedings 20
Item 1A. Risk Factors 21
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Mine Safety Disclosures 21
Item 5 Other information 21
Item 6. Exhibits 22

 

i

 

  

PART I

FINANCIAL INFORMATION

 

Item 1. Financial Statements.

  

My Size, Inc. and Subsidiaries

 

Condensed Consolidated

Interim

Financial Statements

As of September 30, 2018

(unaudited) 

U.S. Dollars in Thousands

  

1

 

  

My Size, Inc. and its subsidiaries

 

Condensed Consolidated Interim Financial Statements as of September 30, 2018 (Unaudited)

 

Contents

 

  Page
   
Condensed Consolidated Interim Balance Sheets 3
   
Condensed Consolidated Interim Statements of Comprehensive Loss 4
   
Condensed Consolidated Interim Statements of changes in Stockholders’ Equity (Deficit) 5
   
Condensed Consolidated Interim Statements of Cash flows 6
   
Notes to Condensed Consolidated Interim Financial Statements 7-15

  

2

 

  

My Size, Inc. and its subsidiaries

 

Condensed Consolidated Interim Balance Sheets

U.S. dollars in thousands (except share data)

 

   September 30,   December 31, 
   2018   2017 
   (Unaudited)   (Audited) 
   $ thousands   $ thousands 
Assets        
Current Assets:        
Cash and cash equivalents   5,406    1,802 
Short-term deposit   2,384    - 
Other receivables and prepaid expenses   82    381 
Restricted cash   77    70 
Total current assets   7,949    2,253 
           
Investment in marketable securities   425    98 
Property and equipment, net   64    67 
    489    165 
           
Total assets   8,438    2,418 
           
Liabilities and stockholders’ equity          
Current liabilities:          
Short-term loan   -    558 
Trade payables   246    245 
Accounts payable   265    336 
Warrants, derivatives and stock based compensation liabilities   2,219    2,431 
Total current liabilities   2,730    3,570 
           
COMMITMENTS AND CONTINGENCIES          
Stockholders’ equity (deficit):          
Stock Capital -          
Common stock of $ 0.001 par value - Authorized: 100,000,000 and 50,000,000 shares;
Issued and outstanding: 29,710,028 and 22,238,745 as of September 30, 2018 and December 31, 2017 respectively
   30    22 
Additional paid-in capital   28,730    16,008 
Accumulated other comprehensive loss   (611)   (134)
Accumulated deficit   (22,441)   (17,048)
Total stockholders’ equity (deficit)   5,708    (1,152)
Total liabilities and stockholders’ equity   8,438    2,418 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

 

3

 

  

My Size, Inc. and its subsidiaries

 

Condensed Consolidated Interim Statements of Comprehensive Loss

U.S. dollars in thousands (except share data and per share data)

 

   Nine-Months Ended
September 30,
   Three-Months Ended
September 30,
 
   2018   2017   2018   2017 
   $ thousands
(Unaudited)
   $ thousands
(Unaudited)
   $ thousands
(Unaudited)
   $ thousands
(Unaudited)
 
Operating expenses                
Research and development   807    624    311    213 
Marketing, general and administrative   3,103    2,667    771    611 
                     
Total operating expenses   3,910    3,291    1,082    824 
Operating loss   (3,910)   (3,291)   (1,082)   (824)
Financial income (expenses), net   (1,483)   (228)   (479)   17 
                     
Net loss   (5,393)   (3,519)   (1,561)   (807)
Other comprehensive income (loss):                    
                     
Gain on available for sale securities   -    93    -    67 
Foreign currency translation differences   (477)   15    31    16 
                     
Total comprehensive loss   (5,870)   (3,411)   (1,530)   (724)
                     
Basic and diluted loss per share   (0.19)   (0.19)   (0.05)   (0.04)
Basic and diluted weighted average number of shares outstanding   28,870,135    17,599,340    29,709,009    17,625,440 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements

 

4

 

 

My Size, Inc. and its subsidiaries

 

Condensed Consolidated Interim Statements of Changes in Stockholders’ Equity (Deficit) (Unaudited)

U.S. dollars in thousands (except share data and per share data)

 

   Common stock   Additional paid-in   Accumulated
other
comprehensive
   Accumulated   Total
stockholders’
equity
 
   Number   Amount   capital   loss   deficit   (deficit) 
                         
Balance as of January 1, 2018  22,238,745   22   16,008   (134)   (17,048)   (1,152) 
                               
Stock-based compensation related to employees   -    -    110    -    -    110 
Issuance of shares to consultants   312,400    1    320    -    -    321 
Total comprehensive loss   -    -    -    (477)   (5,393)   (5,870)
Exercise of warrants and options   3,846,515    4    8,644    -    -    8,648 
Liability reclassified to equity   82,368    (*)   104    -    -    104 
Issuance and receipts on account of shares, net of issuance cost of $351   3,230,000    3    3,544    -    -    3,547 
Balance as of September 30, 2018   29,710,028    30    28,730    (611)   (22,441)   5,708 

 

(*) Represent an amount less than $1.

  

   Common stock   Additional paid-in   Accumulated
other
comprehensive
   Accumulated   Total
stockholders’
equity
 
   Number   Amount   capital   loss   deficit   (deficit) 
                         
Balance as of July 1, 2018   29,678,778    30    28,430    (642)   (20,880)   6,938 
                               
Stock-based compensation related to employees   -    -    4    -    -    4 
Issuance of shares to consultants   31,250    (*)    106    -    -    106 
Total comprehensive income (loss)   -    -    -    31    (1,561)   (1,530)
Exercise of warrants and options   -    -    190    -    -    190 
Balance as of September 30, 2018   29,710,028    30    28,730    (611)   (22,441)   5,708 

 

(*) Represent an amount less than $1.

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements

 

5

 

  

My Size, Inc. and its subsidiaries

 

Condensed Consolidated Interim Statements of Cash Flows

 

   Nine-Months Ended
September 30,
 
   2018   2017 
   $ thousands
(Unaudited)
   $ thousands
(Unaudited)
 
Cash flows from operating activities:        
Net loss   (5,393)   (3,519)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation   24    22 
Revaluation of warrants, loan and derivatives   2,299    (251)
Revaluation and interest on short-term deposits   (8)   - 
Interest payment of short term loan   (192)   - 
Revaluation of investment in marketable securities   (338)   472 
Stock based compensation- equity   431    126 
Stock based compensation- liability   475    265 
Decrease in other receivables and prepaid expenses   8    115 
Change in embedded derivative and warrants   (59)   126 
Increase in trade payable   13    64 
Increase (decrease) in accounts payable   (58)   108 
           
Net cash used in operating activities   (2,798)   (2,472)
           
Cash flows from investing activities:          
           
Purchase of property and equipment   (24)   (8)
Investment in short-term deposits   (2,380)   - 
           
Net cash used in investing activities   (2,404)   (8)
           
Cash flows from financing activities:          
Proceeds from exercise of warrants and options   3,945    - 
Repayment of short-term loan   (555)   (10)
Proceeds from issuance of shares, warrants and short term loan   5,923    2,506 
           
Net cash provided by financing activities   9,313    2,496 
           
Effect of exchange rate fluctuations on cash and cash equivalents   (500)   (36)
           
Increase (decrease) in cash, cash equivalents and restricted cash   3,611    (20)
Cash, cash equivalents and restricted cash at the beginning of the period   1,872    34 
           
Cash, cash equivalents and restricted cash at the end of the period   5,483    14 
           
Non cash transactions          
Exercise of warrants and share-based payment liability to shares   4,703    - 
Derivative liability reclassified to equity   104    - 

 

The accompanying notes are an integral part of the condensed consolidated interim financial statements.

  

6

 

 

My Size, Inc. and its subsidiaries

 

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

 

Note 1 - General

 

  a. My Size, Inc. along with its subsidiaries (collectively, the “Company”) is developing unique measurement technologies based on algorithms with applications in a variety of areas, including the apparel e-commerce market, the courier services market and the do it yourself (“DIY”) smartphone and tablet apps market. The technology is driven by several patent and patent-pending algorithms which are able to calculate and record measurements in a variety of novel ways.
     
  b.

During the nine month period ended September 30, 2018, the Company has incurred significant losses and negative cash flows from operations and as of September 30, 2018, has an accumulated deficit of $22,441. The Company has financed its operations mainly through fundraising from various investors.

 

Management’s plans contemplate that the cash on hand will be sufficient to meet its obligations for a period which is longer than 12 months.

  

Note 2 - Significant Accounting Policies

 

  a. Unaudited condensed consolidated financial statements:

 

The accompanying unaudited condensed consolidated interim financial statements included herein have been prepared by the Company in accordance with the rules and regulations of the United States Securities and Exchange Commission (“SEC”). The unaudited condensed consolidated financial statements are comprised of the financial statements of the Company. In management’s opinion, the interim financial data presented includes all adjustments necessary for a fair presentation. All intercompany accounts and transactions have been eliminated. Certain information required by U.S. generally accepted accounting principles (“GAAP”) has been condensed or omitted in accordance with rules and regulations of the SEC. Operating results for the nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for any future period or for the year ending December 31, 2018.

 

These unaudited condensed consolidated interim financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2017.

 

  b. Use of estimates:

 

The preparation of consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements and the accompanying notes. Actual results could differ materially from these estimates.

 

7

 

 

My Size, Inc. and its subsidiaries

 

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

 

Note 2 - Significant Accounting Policies (cont’d)

 

  c. Impact of recently adopted accounting standard:

 

  1. In January 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) No. 2016-01 (ASU 2016-01) “Financial Instruments-Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” ASU 2016-01 amends various aspects of the recognition, measurement, presentation, and disclosure for financial instruments. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, with other amendments related specifically to equity securities without readily determinable fair values applied prospectively. ASU 2016-01 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2017.

 

The Company adopted this guidance as of January 1, 2018.

 

During the nine and three month period ended September 30, 2018, the Company recorded a gain (loss) of $338 and ($87) respectively for changes in the fair value of the investment in marketable securities in the statements of comprehensive loss in financial income (expenses) and not as other comprehensive income.

 

  2.

In November 2016, the FASB issued guidance on the treatment of restricted cash in the statements of cash flows. Amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The guidance is effective for fiscal years beginning after February 15, 2017, and interim periods within those fiscal years.

 

The Company adopted this guidance retrospectively as of January 1, 2018.

  

  3.

In August 2016, the FASB issued ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments, which provides guidance on several issues related to cash flows classifications.

 

The Company implemented this guidance retrospectively as of January 1, 2018, according to which the payment of a principal short-term loan was classified in the statement of cash flows to cash flow from financing activities and the interest related to the debt was classified in the statements of cash flows to cash flows from operating activities.

 

During the nine and three month period ended September 30, 2018, interest expenses on the short term loan are classified in the statement of cash flows as cash flow from operating activities in the amount of $192 and $0, respectively. 

  

  d.

Impact of recently issued accounting standard not yet adopted:

 

On June 20, 2018, the FASB issued ASU 2018-07, Stock Compensation: Improvements to Nonemployee Share-Based Payment Accounting, align the guidance for stock compensation to employees and nonemployees. The amended guidance replaces ASC 505-50, Equity—Equity-Based Payments to Non-Employees. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2018. Early adoption is permitted in any interim or annual period provided that the entire ASU is adopted.

 

The expected effect of the ASU on the Company’s financial statements will be in the measurement of the existing share-based payments to consultants at fair value. Furthermore the share-based liabilities will be classified to equity. The fair value at the transition date will be considered as the new fair value of the share based payments to consultants and the expenses will then be recognized over the remaining service period.

 

  e. Certain comparative figures and disclosures were reclassified to adjust to current period presentation.

  

8

 

 

My Size, Inc. and its subsidiaries

 

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

 

Note 3 - Financial Instruments

 

Fair value of financial instruments:

 

Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, relating to fair value measurements, defines fair value and established a framework for measuring fair value. ASC 820 fair value hierarchy distinguishes between market participant assumptions developed based on market data obtained from sources independent of the reporting entity and the reporting entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances. ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, essentially an exit price. In addition, the fair value of assets and liabilities should include consideration of non-performance risk, which for the liabilities described below includes the Company’s own credit risk.

 

In accordance with ASC820 when measuring the fair value, an entity shall take into account the characteristics of the asset or liability if a market participant would take those characteristics into account when pricing the asset or liability at the measurement date. Such characteristics include, for example:

 

a.The condition and location of the asset.
b.Restrictions, if any, on the sale or the use of the asset.

 

As a basis for considering such assumptions, ASC 820 establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:

 

  Level 1 -  Valuations based on quoted prices in active markets for identical assets that the Company has the ability to access. Valuation adjustments and block discounts are not applied to Level 1 instruments. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.
     
  Level 2 -  Valuations based on one or more quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
     
  Level 3 -  Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

 

The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative of expected future trends.

  

The carrying amounts of cash and cash equivalents, other receivables, short-term loan, trade payables and accounts payable approximate their fair value due to the short-term maturities of such instruments.

 

The Company holds share certificates in iMine Corporation (“iMine”) formerly known as Diamante Minerals, Inc., a publicly-traded company on the OTCQB and is acting to register them under its name and intends to take all necessary actions to complete such registration.

 

Due to sales restrictions on the sale of the iMine share, the fair value of the shares was measured on the basis of the quoted market price for an otherwise identical unrestricted equity instrument of the same issuer that trades in a public market, adjusted to reflect the effect of the sales restrictions and is therefore, ranked as Level 2 assets.

 

     September 30, 2018 
     Fair value hierarchy 
     Level 1   Level 2   Level 3 
  Financial assets            
              
  Investment in marketable securities (*)           -    425            - 

 

9

 

 

My Size, Inc. and its subsidiaries

 

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

 

Note 3 - Financial Instruments (cont’d)

 

     September 30, 2018 
     Fair value hierarchy 
     Level 1   Level 2   Level 3 
  Financial liabilities            
               
  Warrants, Derivative and stock based compensation liabilities (**)           -    2,219            - 

  

     December 31, 2017 
     Fair value hierarchy 
     Level 1   Level 2   Level 3 
  Financial assets            
               
  Investment in marketable securities (*)           -    98            - 

 

     December 31, 2017 
     Fair value hierarchy 
     Level 1   Level 2   Level 3 
  Financial liabilities            
               
  Warrants, Derivatives and stock based compensation liabilities (**)           -    2,431            - 

 

(*) For the nine and three month period ended September 30, 2018, and 2017, the recognized gain (loss) (based on quoted market prices with a discount due to security-specific restrictions iMine shares) of the marketable securities was $338, $(472), ($87) and $(132), respectively.

 

(**) For the nine and three month period ended September 30, 2018, and 2017, the financial expenses from derivatives resulting from hedging activities was $2, $0, $2 and $0, respectively.

 

10

 

  

My Size, Inc. and its subsidiaries

 

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

 

Note 4 - Stock Based Compensation

 

The stock based expense recognized in the financial statements for services received is related to research and development, marketing, general and administrative expenses and shown in the following table: 

 

     Nine months ended
September 30,
   Three months ended
September 30,
 
     2018   2017   2018   2017 
                   
  Stock-based compensation expense - equity awards   431    126    110    53 
  Stock-based compensation expense - liability awards   475    265    25    88 
                       
      906    391    135    141 

 

Option issued to consultants

  

  a.

Further to Note 10a of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017:

 

During May 2018, the Company issued to Consultant1 an additional 82,368 shares of common stock of the Company and as of September 30, 2018, the Company has no further obligation to Consultant1.

 

During the nine and three month period ended September 30, 2018, costs in the sum of $1 and $0, respectively, were recorded by the Company as stock-based equity-awards.

  

  b.

Further to Note 10b of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017:

 

During January 2018, options to purchase up to 781,838 shares of common stock of the Company were exercised for total proceeds of $1,314.

  

  c.

In January 2018, the Company entered into a twelve month agreement with a consultant (“Consultant6”) to provide strategic consulting and investor relations services. Pursuant to the terms of the agreement, the Company agreed to pay a monthly fee of $5 and to issue to Consultant6 99,000 shares of common stock of the Company in three tranches of 33,000 each, with each tranche vesting on the first day of January, April and August 2018. The issuance of the shares under the agreement was subject to the receipt of all the approvals required by the laws applicable to the Company, including approvals by The Nasdaq Capital Market and the Tel Aviv Stock Exchange (“TASE”), and the approval of the Company’s stockholders to increase the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s 2017 Consultant Equity Incentive Plan (the “2017 Consultant Plan”). The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders on February 12, 2018 at the Company’s special meeting of stockholders.

 

During the nine and three month period ended September 30, 2018, amounts of $84 and $28, respectively, were recorded by the Company as stock-based equity awards with respect to Consultant6.

 

11

 

  

My Size, Inc. and its subsidiaries

 

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

 

Note 4 - Stock Based Compensation (cont’d)

  

  d.

In February 2018, the Company entered into an agreement with a consultant (“Consultant7”) to provide consulting related to investor relations. Pursuant to such agreement and in consideration for such services, the Company agreed to issue to Consultant7 65,000 shares of common stock of the Company. The shares will vest as follows: 50,000 shares shall vest upon the effective date of the agreement and 15,000 shares shall vest three month after the effective date of the agreement.

 

During the nine and three month period ended September 30, 2018, amounts of $78 and $22, respectively, were recorded by the Company as stock-based equity- awards with respect to Consultant7.

     
  e.

In October 2017, the Company entered into agreements with three consultants (collectively, the “Consultants”) to provide services to the Company including promoting the Company’s products and services. For such consulting services, the Company agreed to issue to each of the Consultants options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $2.00 per share. The options shall vest quarterly in four equal installments and shall terminate eighteen months from their respective vesting dates. The issuance of the options under the agreement was subject to the receipt of all the approvals required by the laws applicable to the Company, including approvals by The Nasdaq Capital Market and the TASE and the approval of the Company’s stockholders to increase the number of shares of the Company’s common stock reserved for issuance pursuant to the Company’s 2017 Consultant Plan. The increase in reserve pursuant to the Company’s 2017 Consultant Plan was approved by the Company’s stockholders on February 12, 2018 at the Company’s special meeting of stockholders.

 

During the nine and three month period ended September 30, 2018, amounts of $74 and $22, respectively, were recorded by the Company as stock-based liability- awards with respect to the Consultants.

     
  f.

In August 2018, the Company entered into an agreement with a consultant (“Consultant8”) to provide services to the Company including promoting the Company’s products and services. Pursuant to such agreement and in consideration for such consulting services, the Company agreed to issue to Consultant8 options to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The options shall vest quarterly in eight equal installments and shall terminate five years after the grant date. The issuance of the options under the agreement was subject to the receipt of all the approvals required by the laws applicable to the Company.

 

During the nine and three month period ended September 30, 2018, amounts of $2 and $2, respectively, were recorded by the Company as stock-based liability-awards with respect to Consultant8.

  

Stock Option Plan for Employees

 

In March 2017, the Company adopted the 2017 Equity Incentive Plan (the “Plan”) pursuant to which the Company’s Board of Directors may grant stock options to purchase up to 2,000,000 shares of the Company’s common stock to officers, directors and employees. At the 2018 annual meeting of stockholders, stockholders approved an increase to the number of shares of the Company’s common stock reserved for issuance pursuant to the Plan from 2,000,000 to 3,000,000 shares. The exercise price of the stock options are equal the fair market value of the Company’s stock at the date of grant.

 

During the nine month period ended September 30, 2018, no options were granted, 26,666 options were exercised and 15,500 options expired.

 

The total stock option compensation expense during the nine and three month period ended September 30, 2018 which were recorded as research and development and marketing expenses were $33 and $2, respectively.

 

The total stock option compensation expense during the nine and three month period ended September 30, 2018 which were recorded as general and administrative expenses were $77 and $2, respectively.

  

12

 

  

My Size, Inc. and its subsidiaries

 

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

 

Note 5 - Contingencies and Commitments

  

  a.

Further to Note 12c to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017:

 

On January 25, 2018, the court rendered the settlement agreement (the “Settlement Agreement”) between the parties a status of a judgment. On January 30, 2018, the plaintiff informed the Company that all the Original Shares and the New Shares, were sold for an aggregate of Israeli New Shekel (“NIS”) 1,061,533 ($302,087). Accordingly, the plaintiff was entitled to receive from the Company an additional amount of NIS 213,467 ($62,000) payable either in cash or in kind, by the issuance of additional Company’s common stock (the “Additional Amount”). “Original Shares” means shares of the Company’s common stock originally issued to the plaintiff. “New Shares” means 80,358 additional shares of the Company’s common stock issued to the plaintiff pursuant to the terms of the Settlement Agreement.

 

Pursuant to the Settlement Agreement, the payment of the Additional Amount was due and payable no later than March 16, 2018. On March 13, 2018, the Company paid the plaintiff the Additional Amount.

     
  b.

Further to Note 12d to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017:

 

At a preliminary hearing on the Company’s motion to dismiss, that was held on April 26, 2018, the Court ordered to suspend all the proceedings regarding the class motion and the Company’s motion to dismiss, until Israeli Supreme Court’s adjudication in two cases pending before the Supreme Court, pertaining to similar issues argued by the Company in its motion to dismiss regarding the proper choice of law applicable to foreign companies listed both on TASE and on Nasdaq.

 

On October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’s recommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which accepted arguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoid additional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings.

 

Following the dismissal of the Supreme Court pending cases, a hearing, held on November 19,2018, the court ordered dismissal of the class action with prejudice. No order for costs was made.

 

  c.

Further to Note 12b to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017:

 

On June 12, 2018, the Company and the original plaintiffs (excluding Mr. Asher Shmuelevitch, a former controlling shareholder of the Company) (collectively, the “Shareholders”), entered into a settlement agreement (the “Settlement”).

 

Pursuant to the Settlement, the Company agreed to withdraw its appeal and the Shareholders waived any and all claims, demands, disputes, remedies or causes of action whatsoever against the Company, monetary or otherwise, pertaining to any and all matters related to or in connection with the Shareholders original complaint against the Company and /or the judgment in favor of the Shareholders.

 

13

 

 

My Size, Inc. and its subsidiaries

 

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

 

Note 5 - Contingencies and Commitments (cont’d)

 

 

On June 13, 2018, the Company filed a motion with the Supreme Court of Israel, with the Shareholders’ consent (excluding Mr. Shmuelevitch), requesting to render the Settlement the status of a judgment and to dismiss the appeal, without ordering costs for any of the respondents (the “Motion to Dismiss”).

 

Following the Supreme Court’s order, Mr. Shmuelevitch submitted his written response to the Motion to Dismiss on June 28, 2018, arguing he is entitled to the reimbursement of his cost in connection with the appeal and the original claim.

 

On July 5, 2018, the Supreme Court granted the Motion to Dismiss, endorsed the Settlement and dismissed the appeal.

 

  d.

On August 7, 2018, the Company commenced an action against North Empire LLC (“North Empire”) in the Supreme Court of the State of New York, County of New York for breach of a Securities Purchase Agreement (the “Agreement”) in which it is seeking damages in an amount to be determined at trial, but in no event less than $616,000. On August 2, 2018, North Empire filed a Summons with Notice against the Company, also in the same Court, in which they allege damages in an amount of $11.4 million arising from an alleged breach of the Agreement. On September 6, 2018 North Empire filed a Notice of Discontinuance of the action it had filed on August 2, 2018. On September 27, 2018, North Empire filed an answer and asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificates to North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a third-party complaint against Eli Wales and Ronen Luzon asserting similar claims against them in their individual capacities. On October 17, 2018, the Company filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed a motion to dismiss North Empire’s third-party complaint. The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.

 

  e.

On September 6, 2018, the Company was notified by The Nasdaq Stock Market, (“NASDAQ”) that it was not in compliance with the minimum bid price requirements set forth in NASDAQ Listing Rule 5550(a)(2) for continued listing on The Nasdaq Capital Market. NASDAQ Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and NASDAQ Listing Rule 5810(c)(3)(A) provides that a failure to meet the minimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notification provided that the Company had 180 calendar days, or until March 5, 2019, to regain compliance with NASDAQ Listing Rule 5550(a)(2).

 

On October 10, 2018, the NASDAQ Staff concluded that the Company had regained compliance with its Rule 5550(a)(2) based on the closing bid price of the Company’s common stock having been at $1.00 per share or greater from the 10 consecutive business days from September 20, 2018 to October 9, 2018.

 

The Company’s common stock continues to trade on The Nasdaq Capital Market under the symbol “MYSZ.”

 

14

 

  

My Size, Inc. and its subsidiaries

 

Notes to Condensed Consolidated Interim Financial Statements (unaudited)

U.S. dollars in thousands (except share data and per share data)

 

Note 6 - Significant Events During the Reporting Period

 

  a. Further to Note 10e to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017:
 
On January 23, 2018, the Company and Consultant5 entered into an amendment to the consulting agreement pursuant to which the number of the options were amended such that Consultant5 received options to purchase up to 800,000 shares of the Company’s common stock at an exercise price of $1.00 per share. The options expired on July 23, 2018.

 

  b.

On February 2, 2018, the Company conducted a public offering of its securities pursuant to which it issued an aggregate of 3,000,000 shares of its common stock and five-year warrants to purchase up to 1,500,000 shares of common stock at an exercise price of $2.65 per share for gross proceeds of $6,000. The Company received net proceeds of $5,464 after deducting placement agent fees and other offering expenses.

 

The common stock and warrants are accounted for as two different components.

 

Warrants exercisable into shares of common stock are recognized as a liability and measured at fair value. Changes in fair value are recorded in the statements of comprehensive loss.

 

The warrants were measured at a total fair value of $2,102, and the residual net amount of $3,544 was recorded in the equity.

 

As of September 30, 2018, the warrants were presented in the balance sheet at a fair value of $1,315.

 

The warrants contained price protection in the event that the Company issues additional warrants or common shares at a price lower than the exercise price of the warrants. If the first subsequent placement occurs within six months of the date of issuance of the warrant, then the applicable price shall be reduced to 110% of the new issuance price of such subsequent placement.

     
  c.

Further to Note 11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017:

 

During the nine and three month period ended September 30, 2018, the Company recorded financial expenses of $192 and $0, respectively from the loan.

 

During February 2018 the Company repaid the remaining outstanding balance of the loan.

 

During the nine and three month period ended September 30, 2018, warrants to purchase 444,444 and 111,111 shares of the Company’s common stock were exercised, respectively, for total proceeds to the Company of $318. The issuance of 111,111 shares was made in October 2018.

 

Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $411.

     
  d.

Further to Note 9l to the Company’s Annual Report on Form 10-K for the year ended December 31, 2017:

 

During the nine month period ended September 30, 2018, warrants to purchase 2,654,922 shares of the Company’s common stock were exercised for proceeds to the Company of $2,260. No warrants were exercised during the three month period ended September 30, 2018.

 

Upon the exercise of the warrants, the Company reclassified the liabilities associated with the warrants to equity in the total amount of $3,851.

 

15

 

  

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

You should read the following discussion along with our financial statements and the related notes included in this report. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions, including those discussed under “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2017. Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forward-looking statements.

 

Results of Operations

 

From inception through September 30, 2018, we have sustained an accumulated deficit of $22,441,000. From inception through September 30, 2018, we have not generated any revenue from operations and expect to incur additional losses to perform further research and development activities: We do not currently have any commercial products. Our product development efforts continue to be in the early stages and we are unable to currently make estimates of the costs or the time they will take to complete.

 

Nine and Three Months Ended September 30, 2018 Compared to Nine and Three Months Ended September 30, 2017

 

Research and Development Expenses

 

Our research and development expenses for the nine months ended September 30, 2018 amounted to $807,000 compared to $624,000 for the nine months ended September 30, 2017. The increase between the corresponding period primarily resulted from increased subcontractors expenses and expenses associated with share-based payments to Company’s employees.

 

Our research and development expenses for the three months ended September 30, 2018 amounted to $311,000 compared to $213,000 for the three months ended September 30, 2017. The increase between the corresponding period primarily resulted from increased subcontractors expenses and expenses associated with share-based payments to Company’s employees.

 

Marketing, General and Administrative Expenses

 

Our marketing, general and administrative expenses for the nine months ended September 30, 2018 amounted to $3,103,000 compared to $2,667,000 for the nine months ended September 30, 2017. The increase compared to the corresponding period was mainly due to share-based payments, marketing expenses and professional services which were offset by a reduction in public relations and investor relations expenses.

 

Our marketing, general and administrative expenses for the three months ended September 30, 2018 amounted to $771,000 compared to $611,000 for the three months ended September 30, 2017. The increase compared to the corresponding period was mainly due to share-based payments and professional services offset by increase in marketing expenses.

 

Financial income (Expenses), Net

 

Our financial expenses net for the nine months ended September 30, 2018 amounted to $1,483,000 compared to $228,000 for the nine months ended September 30, 2017. The increase was due to revaluation of warrants, and stock based compensation liabilities, compared to the corresponding period offset by income from revaluation in investment in marketable securities compared to expenses in the corresponding period and income from exchange rate differences compared to expenses in the corresponding period.

 

Our financial expenses net for the three months ended September 30, 2018 amounted to $479,000 compared to financial income of $17,000 for the three months ended September 30, 2017. The increase was due to the revaluation of warrants, derivatives, stock based compensation liabilities and from revaluation of investment in marketable securities, compared to the corresponding prior period.

 

16

 

 

Net Income (Loss)

 

As a result of the foregoing, research and development, marketing, general and administrative expenses, and financial expenses, our net loss for the nine months ended September 30, 2018 was $5,393,000, compared to $3,519,000 for the nine months ended September 30, 2017. The main reasons for the increase in net loss were the expenses due to share-based payments and professional services compared to corresponding period and the expense with respect to the revaluation of warrants, derivatives and stock based compensation liabilities offset by an income from revaluation of investment in marketable securities and exchange rate differences compared to expenses in the corresponding period.

 

As a result of the foregoing research and development, marketing general and administrative expenses, and financial expenses, our net loss for the three months ended September 30, 2018 was $1,561,000, compared to net loss of $807,000 for the three months ended September 30, 2017. The main reasons for the increase in net loss were the expenses due to share-based payments, and professional services compared to corresponding period and the expense with respect to the revaluation of warrants, derivatives and stock based compensation liabilities offset by exchange rate differences compared to expenses in the corresponding period.

 

Liquidity and Capital Resources

 

Since our inception, we have funded our operations primarily through public and private offerings of debt and equity in the State of Israel and in the U.S.

 

As of September 30, 2018, we had cash, cash equivalents and restricted cash of $5,483,000 and short term deposit of $2,384,000 compared to $1,872,000 cash, cash equivalents and restricted cash and no deposits as of December 31, 2017. This increase primarily resulted from the public offering that we completed in February 2018 and from proceeds generated from the exercise of warrants, both of which are further described below.

 

On October 26, 2017, we entered into a securities purchase agreements to sell original issue discount non-convertible notes (the “Notes”) and warrants to certain accredited investors in a private placement. We received gross proceeds of approximately $1,200,000, before deducting placement agent and other offering expenses. The Notes were initially due on the earlier of (i) February 28, 2018 and (ii) the first offering of our equity securities or any equity-linked or related securities with aggregate gross proceeds of at least $1 million. The maturity date of the Notes was subsequently amended to the earlier of (i) the closing of our next offering or (ii) March 31, 2018. As of March 13, 2018, the Company had paid all amounts due and payable on the Notes. The five-year warrants issued in the private offering were initially exercisable at a price of $0.75 per share. The warrants contain price protection provisions in the event that we issue additional equity securities at a price lower than the exercise price of the warrants.

 

In December 2017 we consummated a public offering of our securities. As a result of such offering, the exercise price of the warrants was reduced to $0.715 per share.

 

During the nine and three month period ended September 30, 2018, warrants to purchase 444,444 and 111,111 shares of the Company’s common stock were exercised, respectively, for total proceeds of $318,000. The issuance of 111,111 shares was made in October 2018. 

 

17

 

  

On December 22, 2017, we completed a public offering of 3,832,500 shares of our common stock at a price of $0.65 per share and five-year warrants to purchase an aggregate of 2,874,375 shares of common stock at an exercise price of $0.851 per share. The gross proceeds from the public offering, before deducting placement agent fees and other offering expenses, were $2,490,000. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $2,130,000. As a result of the public offering, the exercise price of the warrants issued in the October 2017 private placement was reduced to $0.715.

 

On December 27, 2017, we repaid $583,000 in principal amount of the Notes, and in February 2018, we repaid the remaining outstanding balance of the Notes.

 

During the nine months ended September 30, 2018, we received $2,260,000 of proceeds from the exercise of the warrants to purchase 2,654,922 shares of common stock issued in our December 2017 private placement.

 

On February 2, 2018, we completed a public offering pursuant to which we issued 3,000,000 shares of our common stock and five-year warrants to purchase an aggregate of 1,500,000 shares of common stock. The gross proceeds from the offering were $6,000,000 prior to deducting placement agent fees and other offering expenses. The net proceeds from the offering after deducting the placement agent fees and other offering expenses were approximately $5,464,000.

 

Cash used in operating activities was $2,798,000 for the nine months ended September 30, 2018, compared to $2,472,000 for the nine months ended September 30, 2017.

 

Net cash used in investing activities was $2,404,000 for the nine months ended September 30, 2018, compared to $8,000 for the nine months ended September 30, 2017. The net cash used in investing activities for the nine month ended September 30, 2018 was mainly for short term deposits compared to purchase of property and equipment during the nine months ended September 30, 2017.

 

We had positive cash flow from financing activities of $9,313,000 for the nine months ended September 30, 2018, compared to $2,496,000 for the nine months ended September 30, 2017. The cash flow from financing activities for the nine months ended September 30, 2018 was due to a public offering our of securities and proceeds from the exercise of the warrants as described above compared to proceeds from a short term loan and a public offering our of securities during the nine months ended September 30, 2017.

 

Off-Balance Sheet Arrangements

 

We have not entered into any transactions with unconsolidated entities in which we have financial guarantees, subordinated retained interests, derivative instruments or other contingent arrangements that expose us to material continuing risks, contingent liabilities or any other obligations under a variable interest in an unconsolidated entity that provides us with financing, liquidity, market risk or credit risk support.

 

Application of Critical Accounting Policies and Estimates

 

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported expenses during the reporting periods. Actual results may differ from these estimates under different assumptions or conditions.

 

While our significant accounting policies are more fully described in the notes to our financial statements appearing elsewhere in this report, we believe that the accounting policies discussed below are critical to our financial results and to the understanding of our past and future performance, as these policies relate to the more significant areas involving management’s estimates and assumptions. We consider an accounting estimate to be critical if: (1) it requires us to make assumptions because information was not available at the time or it included matters that were highly uncertain at the time we were making our estimate; and (2) changes in the estimate could have a material impact on our financial condition or results of operations.

 

18

 

  

Research and development expenses

 

Research expenses are recognized as expenses when incurred. Costs incurred on development projects are recognized as intangible assets as of the date as of which it can be established that it is probable that future economic benefits attributable to the asset will flow to us considering its commercial feasibility. This is generally the case when regulatory approval for commercialization is achieved and costs can be measured reliably. Given the current stage of the development of our products, no development expenditures have yet been capitalized. Intellectual property-related costs for patents are part of the expenditure for the research and development projects. Therefore, registration costs for patents are expensed when incurred as long as the research and development project concerned does not meet the criteria for capitalization.

 

Equity-based compensation

 

The Company accounts for its employees’ share-based compensation as expenses in the financial statements based on Accounting Standards Codification 718. All awards are classified as equity and therefore such cost are measured at the grant date fair value of the award. The Company estimates share option grant date fair value using the Binomial option pricing model.

 

The Company records stock options issued to non-employees at fair value, remeasures to reflect the current fair value at each reporting period and recognizes expense over the related service period.

 

The expected volatility of the share prices reflects the assumption that the historical volatility of the share prices is reasonably indicative of expected future trends.

 

The risk-free interest rate for grants with exercise price denominated in Israeli New Shekel is based on the yield from Israel treasury zero-coupon bonds with an equivalent term. The risk-free interest rate for grants with exercise price denominated in U.S. dollars is based on the yield from U.S. treasury zero-coupon bonds with an equivalent term. 

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

 

Not required for a smaller reporting company.

 

Item 4. Controls and Procedures.

 

Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2018. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of September 30, 2018 were not effective and assessed as material weakness due to lack of controls in providing reasonable assurance regarding the fair value measurement of a financial asset.

 

To address the material weakness and mitigate the lack of fair value measurement of financial assets, we established controls in place to assess, on a quarterly basis, indicators for fair value measurement as well as to involve a valuation specialist in an effort to ensure our financial statements included in this Quarterly Report on Form 10-Q have been prepared in accordance with U.S. generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.

 

Our Chief Executive Officer and Chief Financial Officer do not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

 

Changes in Internal Controls

 

During the most recent fiscal quarter, no change has occurred in our internal control over fiancial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

19

 

  

Part II – Other Information

 

Item 1. Legal Proceedings.

  

From time to time, we may become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business.

 

Set forth below are material updates to pending litigation matters which are more fully disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2018 and June 30, 2018.

 

With respect to the litigation with Lightcom (Israel) Ltd., on October 16, 2018 the appellants in both Supreme Court pending cases withdrew their appeals without prejudice, following the Supreme Court’s recommendation. The Supreme Court commented that it appears that the lower courts’ judgments in the cases before him, which accepted arguments similar to the Company’s arguments in its motion to dismiss, appear to be correct. The Supreme Court recommended that to avoid additional future doubts, the legislator should attend to the matter of the proper choice of law applicable to foreign companies with dual listings. Following the dismissal of the Supreme Court pending cases, at a hearing held on November 19, 2018, the court ordered dismissal of the class action with prejudice. No order for costs was made.

 

With respect to the litigation commenced by fourteen shareholders, on July 5, 2018, the Supreme Court granted the motion to dismiss, endorsed the settlement agreement and dismissed the appeal.

 

With respect to the litigation with North Empire LLC (“North Empire”) on September 27, 2018, North Empire filed an answer and asserted counterclaims in the action commenced by the Company against them, alleging that the Company failed to deliver stock certificates North Empire causing damage to North Empire in the amount of $10,958,589. North Empire also filed a third-party complaint against Eli Wales and Ronen Luzon asserting similar claims against them in their individual capacities. On October 17, 2018, the Company filed a reply to North Empire’s counterclaims. On November 15, 2018, Eli Walles and Ronen Luzon filed a motion to dismiss North Empire’s third-party complaint. The Company believes, based on the opinion of its legal counsel, it is more likely than not that the counterclaims will be denied.

 

20

 

  

Item 1A. Risk Factors.

 

Not required for a smaller reporting company.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

None.

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosures.

 

Not applicable.

  

Item 5. Other Information.

 

On November 18, 2018, My Size Israel 2014 Ltd. (“My Size Israel”), a subsidiary of the Company, entered into an employment agreement with Ronen Luzon (the “Luzon Employment Agreement”) pursuant to which Mr. Luzon will serve as Chief Executive Officer of the Company. Pursuant to the terms of the Luzon Employment Agreement, Mr. Luzon shall receive NIS 50,000 per month as his base salary and shall be eligible to receive such bonus as determined by the Company. In addition, Mr. Luzon shall be entitled to other benefits, including, but not limited to, Company contributions towards an education fund and insurance coverage, including for disability. The term of the Luzon Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of the termination of such agreement. The Company may also terminate Mr. Luzon’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined in the Luzon Employment Agreement). Pursuant to the terms of the Luzon Employment Agreement and subject to certain conditions, payments made by the Company to a comprehensive pension fund (the “Pension Fund”), to a managers insurance, or a combination of payments to an annuity fund and a non-annuity fund (the “Insurance Fund”), including a combination of payments to a Pension Fund and an Insurance Fund, shall be made in lieu of severance payments due to Mr. Luzon.

 

On November 18, 2018, My Size Israel entered into an employment agreement with Or Kles (the “Kles Employment Agreement”) pursuant to which Mr. Kles will serve as Chief Financial Officer of the Company. Pursuant to the terms of the Kles Employment Agreement, Mr. Kles shall receive NIS 30,000 per month as his base salary and shall be eligible to receive such bonus as determined by the Company. In addition, Mr. Kles shall be entitled to other benefits, including, but not limited to, Company contributions towards an education fund and insurance coverage, including for disability. The term of the Kles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of the termination of such agreement. The Company may also terminate Mr. Kles’ employment without prior written notice (or payment in lieu of such notice) for Cause (as defined in the Kles Employment Agreement). Pursuant to the terms of the Kles Employment Agreement and subject to certain conditions, payments made by the Company to the Pension Fund or to the Insurance Fund, including a combination of payments to a Pension Fund and an Insurance Fund, shall be made in lieu of severance payments due to Mr. Kles.

 

On November 18, 2018, My Size Israel entered into an employment agreement with Billy Pardo  (the “Pardo Employment Agreement”) pursuant to which Mrs. Pardo will serve as Chief Product Officer of the Company. Pursuant to the terms of the Pardo Employment Agreement, Mrs. Pardo shall receive NIS 40,000 per month as her base salary and shall be eligible to receive such bonus as determined by the Company. In addition, Mrs. Pardo shall be entitled to other benefits, including, but not limited to, Company contributions towards an education fund and insurance coverage, including for disability. The term of the Pardo Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of the termination of such agreement. The Company may also terminate Mrs. Pardo’s employment without prior written notice (or payment in lieu of such notice) for Cause (as defined in the Pardo Employment Agreement). Pursuant to the terms of the Pardo Employment Agreement and subject to certain conditions, payments made by the Company to the Pension Fund or to the Insurance Fund, including a combination of payments to a Pension Fund and an Insurance Fund, shall be made in lieu of severance payments due to Mrs. Pardo.

 

On November 18, 2018, My Size Israel entered into an employment agreement with Eliyahu Walles  (the “Walles Employment Agreement”) pursuant to which Mr. Walles will serve as Chairman of the Board of Directors of the Company. Pursuant to the terms of the Walles Employment Agreement, Mr. Walles shall receive NIS 35,000 per month as his base salary and shall be eligible to receive such bonus as determined by the Company. In addition, Mr. Walles shall be entitled to other benefits, including, but not limited to, Company contributions towards an education fund and insurance coverage, including for disability. The term of the Walles Employment Agreement shall be effective as of September 1, 2018 and shall continue until such time either party provides written notice to the other party at least 75 days in advance of the termination of such agreement. The Company may also terminate Mr. Walles’ employment without prior written notice (or payment in lieu of such notice) for Cause (as defined in the Walles Employment Agreement). Pursuant to the terms of the Walles Employment Agreement and subject to certain conditions, payments made by the Company to the Pension Fund or to the Insurance Fund, including a combination of payments to a Pension Fund and an Insurance Fund, shall be made in lieu of severance payments due to Mr. Walles.

 

The foregoing descriptions of the Luzon Employment Agreement, Kles Employment Agreement, Pardo Employment Agreement and Walles Employment Agreement are not complete and are qualified in their entireties by reference to the full text of the Luzon Employment Agreement, Kles Employment Agreement, Pardo Employment Agreement and Wales Employment Agreement, copies of which are filed as Exhibits 10.1, 10.2, 10.3 and 10.4, respectively, to this Quarterly Report on Form 10-Q and are incorporated by reference herein.

 

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Item 6. Exhibits.

  

Exhibit Number   Description of Exhibits
10.1*+   Employment Agreement between the Company and Ronen Luzon dated November 18, 2018
10.2*+   Employment Agreement between the Company and Or Kles dated November 18, 2018
10.3*+   Employment Agreement between the Company and Billy Pardo dated November 18, 2018
10.4*+   Employment Agreement between the Company and Eliyahu Walles dated November 18, 2018
31.1*   Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*   Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*   Certification of Principal Executive Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*   Certification of Principal Financial Officer pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
     
101.INS*   XBRL Instance Document
101.SCH*   XBRL Taxonomy Schema
101.CAL*   XBRL Taxonomy Calculation Linkbase
101.DEF*   XBRL Taxonomy Definition Linkbase
101.LAB*   XBRL Taxonomy Label Linkbase
101.PRE*   XBRL Taxonomy Presentation Linkbase

 

* Filed herewith

+ Indicates a management contract or any compensatory plan, contract or arrangement

  

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

  

  My Size, Inc.
   
Date: November 19, 2018 By: /s/ Ronen Luzon
    Ronen Luzon
   

Chief Executive Officer

(Principal Executive Officer)

 

Date: November 19, 2018 By: /s/ Or Kles
    Or Kles
   

Chief Financial Officer

(Principal Financial and Accounting Officer)

 

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