The accompanying notes are an integral
part of the consolidated financial statements.
The accompanying notes are an integral
part of the interim financial statements
The accompanying notes are an integral
part of the interim financial statements
The accompanying notes are an integral
part of the interim financial statements
The accompanying notes are an integral
part of the interim financial statements.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note 1 – General
|
a.
|
My
Size Inc. (the “Company”) developed a unique measurement technology based on sophisticated algorithms with broad
applications in a variety of areas, from the apparel e-commerce market to Do It Yourself (DIY) smartphone & tablet apps.
The technology is driven by several patent-pending algorithms which are able to calculate and record measurements in a variety
of novel ways.
|
|
|
|
|
b.
|
Since
inception, the Company has incurred losses and negative cash flows from operations and the accumulated loss has reached $13
million. The Company has financed its operations mainly through fundraising from private investors.
As of March 31, 2017, the Company entered into fund raising agreements in a total sum of $8,015 out of which the sum of $4,596
and $1,410 was received in cash and marketable securities, respectively. The marketable securities are shares of common stock
of Diamante minerals Inc (“DIMN”), which are presented in the Company’s balance sheet as a financial asset
available for sale.
|
As
of the date of the report, the Company has $1,514 and $495 in guaranteed notes and checks, respectively. The guarantee has been
provided by an ungraded financial institution. Subsequent to March 31, 2017, the sum of $550 and $40 of the guarantee notes and
the checks respectively have been redeemed in cash.
For
the purpose of financing its operating activities in the foreseeable future, the Company relies on the collection of existing
cash commitments from investors, the sale of marketable securities and raising additional funds. However, there is no certainty
regarding the Company’s ability to collect committed funds, obtain additional funding or sell the DIMN shares that
it holds. The Company estimates that the committed investments will be adequate to fund its operations through the 12 months following
the approval date of the financial statements. Failure to obtain the additional funds as mentioned above will require the Company
to curtail operations.
However,
If all the committed funds are not collected or not replaced by additional funding, there is a significant doubt regarding
the Company's ability to continue its operation as a going concern. The financial statements include no adjustments for measurement
or presentation of assets and liabilities, which may be required should the Company fail to operate as a going concern.
Note
2 - Significant Accounting Policies
|
a.
|
Unaudited
condensed consolidated financial statements:
|
The
accompanying unaudited condensed consolidated 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 and its subsidiaries collectively referred
to as 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 has been condensed or omitted in accordance with rules and regulations of the SEC. Operating results
for the three months ended March 31, 2017 are not necessarily indicative of the results that may be expected for any future period
or for the year ending December 31, 2017.
These
unaudited condensed consolidated 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, 2016.
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.
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note
2 - Significant Accounting Policies (cont’d)
|
c.
|
Impact of
recently issued accounting standard not yet adopted:
|
In January 2016, the FASB
issued Accounting Standards Update 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. With respect to our consolidated financial statements, the most significant
impact relates to the recognition and measurement for equity investments. Additionally, ASU 2016-01 will impact the disclosure
and presentation of financial assets and liabilities. ASU 2016-01 is effective for annual reporting periods, and interim periods
within those years beginning after December 15, 2017. Early adoption by public entities is permitted only for certain provisions.
The Company is examining the effects of the update on the financial statements with no plans for early adoption.
In February 2016, the FASB
issued Accounting Standards Update No. 2016-02 (ASU 2016-02) which amends the FASB Accounting Standards Codification and created
Topic 842, “Leases.” Under Topic 842, lessees are required to recognize assets and liabilities on the balance sheet
for most leases and provides for enhanced disclosures. Leases will continue to be classified as either finance or operating. ASU
2016-02 is effective for annual reporting periods, and interim periods within those years beginning after December 15, 2018. Entities
are required to use a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest
comparative period in the financial statements. Full retrospective application is prohibited and early adoption by public entities
is permitted. The Company is examining the possibility of early adoption of the update and the anticipated effects of its adoption
on the financial statements.
In June 2016, the FASB
issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments, which significantly changes the way entities recognize
impairment of many financial assets by requiring immediate recognition of estimated credit losses expected to occur over their
remaining life. This ASU is effective for annual and interim periods in fiscal years beginning after December 15, 2019. Early
adoption is permitted for annual and interim periods in fiscal years beginning after December 15, 2018. The impact of adopting
the new standard on the net income is not expected to be material.
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note
3 - Financial Instruments
Fair
value of financial instruments:
ASC
820, “Fair Value Measurements and Disclosures”, defines fair value as the price that would be received to sell an asset
or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the
measurement date.
In determining
fair value, the Company uses various valuation approaches. ASC 820 establishes a hierarchy for inputs used in measuring fair value
that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable
inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability
developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the
Company’s assumptions about the assumptions market participants would use in pricing the asset or liability developed based on
the best information available in the circumstances.
The
fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs
when measuring fair value.
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 accounts receivable, short-term loan, accounts payable and other accounts
payable approximate their fair value due to the short-term maturities of such instruments.
The Company holds shares
in a publicly-traded company - Diamante minerals Inc which are classified as available-for-sale equity securities. The
marketable securities have readily determinable fair market values that are calculated based on the share price in the
measurement date and ranked as Level 1 assets.
|
|
|
March 31, 2017
|
|
|
|
|
Fair value hierarchy
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in marketable securities (*)
|
|
|
362
|
|
|
|
-
|
|
|
|
-
|
|
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note
3 - Financial Instruments (cont’d)
|
|
|
March 31,
2017
|
|
|
|
|
Fair value
hierarchy
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants to purchase common stock (*)
|
|
|
-
|
|
|
|
168
|
|
|
|
-
|
|
|
Derivative liabilities (**)
|
|
|
-
|
|
|
|
78
|
|
|
|
-
|
|
(*) see note 6.
(**) see note 4a.
|
|
|
March 31,
2016
|
|
|
|
|
Fair value
hierarchy
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in marketable securities (***)
|
|
|
1,012
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Put Options – DIMN shares
|
|
|
-
|
|
|
|
989
|
|
|
|
-
|
|
|
|
|
March
31, 2016
|
|
|
|
|
Fair value
hierarchy
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities embedded conversion options
|
|
|
-
|
|
|
|
14
|
|
|
|
-
|
|
|
|
|
December
31, 2016
|
|
|
|
|
Fair value
hierarchy
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in marketable securities (***)
|
|
|
579
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
December
31, 2016
|
|
|
|
|
Fair value
hierarchy
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative liabilities
|
|
|
-
|
|
|
|
80
|
|
|
|
-
|
|
(***) At
March 31, 2017, gross unrecognized loss, recognized loss and fair value (based on quoted market prices) of these securities were
$(93), $340 and $362, respectively (At December 31, 2016, $24, $1,233 and $579, respectively)
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note
4 - Stock Based Compensation
The
stock based expense (income) recognized in the financial statements for services received from employees and non-employees is
shown in the following table:
|
|
|
Three
months ended
March 31
|
|
|
Year
ended
December 31,
|
|
|
|
|
2017
|
|
|
2016
|
|
|
2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing,
General and Administrative
|
|
|
39
|
|
|
|
(50
|
)
|
|
|
(23
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
39
|
|
|
|
(50
|
)
|
|
|
(23
|
)
|
|
a.
|
In December 2016, the Company entered into a consulting agreement with a consultant (the “Consultant”) for the rendering of providing services in connection with marketing strategies, micro and macro-economic issues and for the promotion of the Company's marketing, business, products and operations through smartphone applications. The agreement is for a period of 18 months commencing from October 2016.
In consideration for the services the Company will issue to the Consultant 25,000 shares of common stock of the Company which will be transferred in five installments of 4,150 each and a sixth installment of 4,250 shares each quarter. In addition, the company will issue to the Consultant stock options for the acquisition of the Company shares, exercisable not later than March 31, 2018 at an exercise price of NIS18 per share.
In addition, the Company undertook to pay the balance of the consideration for the sale of the shares by the Consultant up to the sum of NIS500,000. If the consideration for the sale of the shares falls below 90% of the shares' price on the stock exchange on the date of their sale, the Company shall pay the Consultant the difference. The company may decide at its own discretion whether to make such payment in cash or shares.
|
On March 21, 2017, the general meeting adopted a resolution for the approval of a capital remuneration plan for consultants.
The approval was required for the issue of the shares of common stock of the Company and the stock options.
During 2017, costs in the
sum of $12 ($90 during 2016) were recorded by the Company and an undertaking to pay the balance of the consideration was recognized
in the sum of $78 ($80 during 2016) according to the fair value of the undertaking. The issue of the shares of common stock of
the Company and stock options was subject to the receipt of all required regulatory approvals. As of the date of the financial
report, the shares and options have not yet been issued.
|
b.
|
In
December 2016, the Company engaged with an external consultant (the “Consultant”) to provide services in marketing
strategy and public relations, including potential investors relations. For such consulting services, the Company shall issue
to the Consultant options to purchase 2,000,000 shares of common stock at variable exercise prices ranging from $3.50 to $9.00
per share and exercisable for periods ranging from 12 month (or 6 months from filing date of registration statement) to 36 months.
The issuance of the options under the agreement is subject to the receipt of all the approvals required by the laws applicable
to the Company, including stock exchange approvals and the approval of a meeting of its shareholders to adopt an equity incentive
plan for consultants. The equity incentive plan for consultants was approved by the shareholders on March 21, 2017, and such options
have not yet been issued. The expenses were recognized for the proportion of the time in the sum of $26 according to the fair
value of the undertaking. The balance of the consideration for the rest of the expenses in accordance with the fair value was
recognized in trade receivables for the sum of $958.
On
May 16, 2017, subsequent to the reporting period, the Company and the Consultant signed an amendment to the agreement for
making the adjustment to the strike prices so prices ranging from $1.50 to $5.00 per share.
|
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note 5 -
Contingencies
and Commitments
|
a.
|
On December
27, 2015, the Company received a legal complaint. The defendants are the Company, all the members of the Board of Directors, Mrs.
Shoshana Zigdon, a shareholder and related party of the Company, as well as two additional defendants who are not shareholders,
officers or directors of the Company. The plaintiff alleges that the Company violated its obligation to register his shares for
trade with the Tel Aviv Stock Exchange causing a total of 2,622,500 NIS damage. The plaintiff seeks relief against the defendants
through financial compensation at the rate of the aforementioned alleged damage; additional compensation of 400,000 NIS due to
mental anguish; and if and to the extent that until the time the plaintiff c
an sell its shares on the Tel Aviv Stock Exchange
("the exercise date "), if the rate of a Company shares rises above the amount of 20.98 NIS ("the base rate"),
an additional amount at the rate of the difference between the base rate and the highest rate of the Company's shares between the
time the claim was submitted and the exercise date; and also court costs and attorney's fees of the plaintiff.
All pre-trial preliminary proceedings
as well as submission of all evidentiary affidavits and expert opinions by both parties have been completed.
Pursuant to the Court's recommendation,
the case was referred to mediation by the honorable Judge (Rtd.) Hilla Gerstel, former president of the Central District Court.
The mediation is going on and the next mediation session is scheduled for June 5, 2017.
The Company estimates, based on the
opinion of its legal counsel that the risk of acceptance of the remedy requested by the plaintiff in his claim, namely, that the
Company was obligated to remove the restriction which was imposed on the shares and register plaintiff's shares for trade on the
stock exchange, exceeds the chance of its dismissal. This remedy, as such, does not constitute any financial exposure to the Company.
However, the company believes, based on the opinion of its legal counsel, that assuming the plaintiff's claim for the main relief,
i.e. the removal of the restriction from and the registration of his shares on the stock exchange, will be accepted by the court,
it appears that prima face the risk that the court will also rule that the plaintiff is entitled to financial compensation for
the alleged delay in registering his shares, exceeds the chance that such financial compensation will not be awarded
.
|
According to the expert opinion
submitted to the court by the plaintiff, the plaintiff's expert calculates the approximate damage allegedly caused to the plaintiff
between 3-3.6 million NIS assuming the shares will be registered by December 31, 2016, and additional compensation for each additional
month subsequently. According to the Company's expert opinion submitted to the court, the Company's expert asserts that the plaintiff's
expert opinion is erroneous and in his opinion and assuming the plaintiff's claim will be accepted by the court, than the estimated
damage caused to the plaintiff as a result of a 4-5 years delay in registering his shares is estimated at approximately NIS 234,000
(plus interest and CPI differences) if it will be ruled that the restriction from plaintiff's shares should have been removed within
six months as of the purchase date thereof and at approximately NIS 130,000 if it will be ruled that the restriction from plaintiff's
shares should have been removed within twelve months as of the purchase day thereof. It should be noted that all experts' calculations
are based on the share market price, and consequently any changes in the share price at the time a judgement will be rendered by
the court, could increase or decrease the Company's exposure, respectively.
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note 5 -
Contingencies
and Commitments (cont’d)
At this stage, the time for
the submission of an expert opinion on behalf of the Company for the calculation of the damage has not arrived and the appropriate
method of calculating the loss based on the circumstances in this case has not been determined.
|
b.
|
On May 17, 2012, the Company signed an agreement for a convertible loan with a third party (hereinafter the “Investor”).
In accordance with the loan agreement, the Company received a total of NIS 200,000 with the signing of the loan agreement and
was to receive an additional amount of NIS 100,000 at the end of a period not exceeding 21 days, during which the investor would
perform due diligence on the Company. In addition, the agreement was for additional investments up to a total of NIS 2,000,000.
|
Under the agreement, the
investor was entitled to convert the loan amounts granted to the Company into common shares of the Company with US $ 0.001 par
value each, at a price per share equal to the amount of NIS 0.97. If the loans were not converted into the Company shares, the
loan was to be repaid one year after the date of the loan agreement plus annual interest of 10%.
On February 18, 2015, the Company
received a claim in a summary judgement for the investor’s demand of payment of the loan amount of NIS 200,000, which was
granted to the Company on May 17, 2012, plus interest of 10% annually as from May 20, 2012 until payment of the debt, which as
of the date of filing of the claim was NIS 258,000.
On June 13, 2016, a settlement
agreement was entered into between the parties according to which in consideration for the final and conclusive annulment of all
claims and/or demands raised by the plaintiff against the Company in the framework of the law suit, the Company would pay the plaintiff
the sum of NIS 250,000 forthwith by wire transfer of about NIS 95,000 and by the forfeiture of the sum of about NIS 155,000 which
had been deposited with the court. An additional amount of NIS 50,000 would be paid within twelve months from the approval of the
settlement agreement by the court or on the closing date of a public offering of Company shares, pursuant to its terms, on a stock
exchange in the United States, the earlier of. As of the date on which the financial statements were signed the payment has not
yet occurred.
|
c.
|
On September 9, 2015, fourteen shareholders filed a complaint against the Company and its CEO Mr. Ronen Luzon, alleging that in accordance with agreements signed between plaintiffs and the Company, the plaintiffs are entitled to register their shares for sale with the stock market, while the Company allegedly breached its obligation and refrained from doing its duty to register the plaintiffs' shares. The plaintiffs seek declaratory remedy that they are entitled to register their shares and also request the right to split their remedies so they will also be able subsequently to claim from the defendants compensation for any financial damage causes by the Company's failure to register their shares, including damage due to any decrease in the shares' price during the period the shares should have been registered. On November 5, 2015, the Company filed its defense and a counter claim against the plaintiffs and against two additional defendants (who are not plaintiffs) Mr. Asher Shmuelevitch and Mr. Eitan Nahum. In its counter claim, the Company allege that the agreements by force of which the counter defendants hold their shares are defunct, based on fraud, as the counter defendants never paid and never intended to pay the agreed consideration for their shares. The Company further alleges the Mr. Shmuelevitch used his position as a director and controlling shareholder of the Company to knowingly cause the Company to enter such defunct agreements. The Company moved the court to dismiss the complaint against it, declare that all agreements with the counter defendants are null and void and that the shares should be returned to the Company. Additionally, the Company seeks financial compensation from the counter defendants for financial damage caused as a result of their actions. For the purpose of the trial charge only, the Company capped the requested compensation against counter defendants at NIS 10 million. All preliminary proceedings and hearing of all evidence by the court have been completed and the case awaits the court's judgement.
|
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note 5 -
Contingencies
and Commitments (cont’d)
|
d.
|
On January 16, 2014, the Company received a demand letter from one of its shareholders for the payment of about $1.4 million as compensation for alleged breaches by several parties including the Company and its previous controlling shareholder (who is not the current controlling shareholder of the Company) of an allotment agreement between the Company and its previous controlling shareholder and the shareholders of Metamorefix. The execution of the allotment agreement was completed in December 2011 and thereafter, in January 2013, the entire share capital of Metamorefix was sold by the Company.
|
|
e.
|
On November 14, 2014, the Company entered into a cooperation agreement for a period of six months with IN SITU S.A. (hereinafter respectively: the “Agreement” and “IN SITU”) the owner of the rights in the fashion brand-name TRUCCO, which includes women’s fashion, belts and footwear and which is marketed and sold all over the world by IN SITU through a chain of stores and sale points as well as through TRUCCO’s website (hereinafter: the “Website”). According to the Agreement, IN SITU and the Company will cooperate in a bid to integrate the Company’s measurement technology (hereinafter: the “Platform”) in IN SITU’s computerized data system and any other system which would enable to use the Platform on the Website as well as in the store and sale points for the examination of the Platform’s efficiency in relation to IN SITU’s sales and customers’ satisfaction. The Company undertook that not later than within six months from the date of execution of the Agreement, the Platform would be completed and operable, namely, that the integration between the data systems of the parties would be completed and the end-customer would be able to take his measurements and purchase a befitting product using the Platform. Should the Company fail to fulfill its undertakings under the Agreement to grant the license and/or fully integrate the Platform within six months from the date of execution of the Agreement, the Company shall compensate IN SITU in the sum of 60 thousand Euros. As a result of the extended timetable there is an understanding between the parties to continue cooperation.
|
|
f.
|
On January 9, 2014, the Company’s
general meeting approved an engagement with one of the investors (as specified in paragraph
1b above) for the acquisition of rights in a Venture for the accumulation of physical
data of human beings by portable electronic devices for the purpose of locating, based
on the accumulated data, articles of clothing in internet apparel stores, which will
fit the person whose measurements were accumulated.
|
In consideration for the
acquisition of the Venture, the Company will undertake to pay the seller 18% the Company’s operational profit arising directly
or indirectly from the Venture during a period of seven years from the termination of the development period of the Venture. In
addition the Seller received an option for a buy-back of the Venture upon the occurrence of any one or more of the following:
(a) if an application was filed for the liquidation of the Company or for the appointment of a receiver for the Company’s assets
or any material part thereof or for the imposition of a lien on a material part of the Company’s assets, which were not revoked
within 60 days from the date they were so filed; (b) if by the end of seven years from the execution date of the agreement the
entire aggregate income of the Company arising directly or indirectly from the Venture or from the commercialization of the patent
was lower than NIS 3.6 million. According to the Company’s evaluation, the current value is negligible. The buy-back option is
valid for 90 days from the occurrence of either one of the above events. The agreed consideration was determined based on a valuation
which was prepared by an independent assessor.
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note 5 -
Contingencies
and Commitments (cont’d)
|
g.
|
In November, 2015, the Company entered a collaboration agreement with one of the Israel’s largest private couriers (“Katz”) under which the parties will collaborate to develop an application based on the Company’s technology, which will allow the end customer to measure the size of packages intended for shipment and to receive details about the cost of sending the package, based on its size. The collaboration agreement is for a period of up to six months, which may be extended by agreement of both parties or terminated by either party with prior notice of 14 days.
|
On July 4, 2016, the Company
announced that it completed integration of the first app (beta) that it developed in the said affiliation in the Katz’ systems.
The application uses the
Company’s exclusive measuring algorithm and enables measuring the package’s volume by moving the smart phone over the
package. This information, and the package’s barcode scan, picture and location,are sent to the information servers of the
Katz company and help in its pricing.
On November 7, 2016, the
Company announced the launch of KatzID app, which is an application that enables customers to quickly and easily measure the size
of a package and calculate the exact shipping cost. KatzID also provides shipping companies accurate logistic data to better manage
the process of shipping packages before the packages reach their distribution centers. The Company is currently carrying out a
pilot to implement KatzID with Katz. According to the last agreement with Katz , by the end of 2017 the commercial terms will be
discussed , depends on the activity during the pilot.
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h.
|
On March 4, 2016, the Company entered a collaboration and license agreement with LSY International, Inc., a private company incorporated in the United States and which, among other things, sells luxury clothes made of fur, cashmere, alpaca, and shearling under the brand name
“Yudovsky”.
|
Under the agreement, the
parties will cooperate for the purpose of integrating the Company’s measurement technology and computerized information systems
of LSY. The agreement stipulates that the integration of these technologies, will be completed within four months from the date
the agreement was signed. The complexity in achieving the correct matching between the fur coat and the Human body is still in
an experiment stage.
The Parties are in a continues
contact and decided to delay the completion of the integration.
Upon completion of the integration,
a 60-day technology testing period will begin, after which, subject to the fulfillment of the technological conditions, the agreement
will take effect.
According to the agreement,
the Company shall be entitled to a total of 7.5% of every sale by LSY, and LSY company will pay a monthly sum of $ 2.5 for maintenance
fees and services that the Company will provide.
As the Company successfully
completes integration of the technology into LSY’s systems and subject to the limitations set forth in the agreement, the
Company will grant to LSY exclusive license to use the technology in the field of luxury clothing made of: fur, cashmere, alpaca
and shearling. The exclusive license will be awarded to LSY as long as the Company will have a minimal income from the agreement
as follows:
1) Minimum income of $ 1,000 at the end of the first period of 24 months from the effective date, and
2) Minimum income of $
5,000 at the end of each subsequent year.
Under the agreement, LSY
will pay the Company $100 in fees for establishment and implementation of technology systems as follows:
1)
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|
$ 10 upon signing
the agreement.
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2)
|
|
$30 upon start
of implementation.
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3)
|
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$20 upon completion
of implementation.
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4)
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$40 balance upon completion
of testing and monitoring implementation and the agreement taking effect.
|
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note
5 - Contingencies and Commitments (cont’d)
As
of the reporting date, the Company received a total of $10 in accordance with the said terms of the agreement, which was recorded
as deferred revenue in the framework of the payables section and credit balances until the fulfillment of conditions for revenue
recognition.
|
i.
|
On
April 20, 2017, the Company received a communication from the Israeli Postal Service (the “Israeli Post”)
terminating its relationship and ceasing further discussions.
Previously,
on April 18, 2017, the Company announced it had entered into a cooperation agreement with Israel Post which was mischaracterized
by the Company as a definitive agreement. The Company and the Israeli Post had exchanged letters under which it was agreed
to enter into a non-exclusive pilot program, pursuant to which the Israeli Post would decide whether it would enter negotiations
with the company regarding the purchase of the product and under which commercial terms.
On April 20, 2017, the Company issued a corrective press release explaining that while the Company had submitted a proposal
to the Israel Post, which was initially received favorably, the parties had not entered into or signed any formal or definitive
agreement, and did not expect to enter into a formal or definitive agreement with respect to the pilot program or new
services until the completion of the development and trial periods.
The
Israel Post expressed its discontent with the release of inaccurate information, and has elected to cease communication
with the Company.
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|
j.
|
On
May 3, 2017, Lightcom (Israel) Ltd., an Israeli company, alleging that it is a shareholder of the Company, filed a motion
with the Tel Aviv District Court (Financial Division) to approve an action against the Company as a shareholders’
class action. The subject matter of the action appears to be an immediate report filed by the Company on April 19, 2017.
The Court ordered the Company to respond to the motion by August 2, 2017 (“
the Application
”).
On
May 7 2017, the Company was served with the application.
The
Application alleges, inter alia, that the Company's report of April 19, 2017 regarding its engagement with the Israeli Post was
false and misleading, and that as a result thereof financial damages have been incurred by two purported classes of shareholders:
(i) any shareholder who sold Company's shares as of April 20, 2017 and until April 27, 2017, with respect to damage directly caused
by such sale and (ii) any shareholder which held shares on April 20, 2017 and subsequent to April 27, 2017 with respect to damage
caused by permanent adverse effect to the shares' value. The alleged financial damage caused to members of both classes is estimated
at NIS 18.8 million.
The
Company reviewed the Application initially with its legal counsel. At this preliminary stage, the Company believes that there
is no direct causal connection between the Company's report which is the subject matter of the Application and the alleged damages
caused to either class of purported plaintiffs and that in any case there appears to be no correlation between the alleged scope
of damages and the merits of the alleged case.
The Company's is reviewing its
rights to file a third party claim (notice) against third parties the unlawful acts or omissions of which may have had an adverse
effect on the Company's share price and may have contributed to any alleged damage which may have been caused to any of the classes
of alleged plaintiffs. The Company will respond to the Application in the time frame ordered by the Court.
|
Note
6 - Significant Events During the Reporting Period
|
a.
|
In
February 2017, the Board of Directors approved agreements with investors that provided an investment for a total amount
of $200 in exchange for 200,000 shares of common stock of the Company and non-negotiable warrants exercisable into 250,000
shares of common stock of the Company until November 22, 2017 at an exercise price of $3.50 per share.
On
the date of its receipt of the investment, the amount was attributed to options to Company shares – measured according
to the fair value on the measurement date. There was no attribute to the share issuance due to the fair value of the options.
The options were recorded as a liability and was recognized for the reporting date in the sum of $168 according to the
fair value of the undertaking.
|
My Size Inc.
Notes
to Condensed Consolidated Financial Statements
U.S. dollars in thousands (except
share data and per share data)
Note 7 - Subsequent Events
As described in Note 1b, as of March 31,
2017 the Company entered into fund raising agreements in a total sum of $8,015 out of which the sum of $4,596 and $1,410 was received
in cash and marketable securities, respectively.
As the date of this report
the Company has $1,514 and $495 in guaranteed notes and checks. Subsequent to March 31, 2017, the sum of $550 and $40 of the guarantee
notes and the checks, respectively, have been redeemed in cash.
The following proforma consolidated balance
sheet is based on the March 31, 2017 balance sheet with adjustments for receipt of $1,419 from the remaining guarantee notes and
checks from investors for stock subscribed for but not yet issued.
|
Assets
|
|
$
|
3,900
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
865
|
|
|
Stockholders’ equity
|
|
|
3,035
|
|
|
Total liabilities and stockholders’ equity
|
|
$
|
3,900
|
|
The effect on equity and on the assets
of collecting the money from the bank guarantees and the checks is an increase of $1,419. As a result of the foregoing, the Company’s
stockholder’s equity, on a pro forma basis, is $3,035 as of March 31, 2017.