I.R.S. Employer Identification Number
(Address, including zip code, and telephone
number, including area code of registrant’s principal executive offices)
(Name, address, including zip code, and
telephone number, including area code, of agent for service)
Richard A. Friedman, Esq.
Approximate date of commencement of proposed
sale to the public: From time to time after the effective date of this registration statement.
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Indicate by check mark whether the registrant
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SUMMARY
This summary highlights information contained
elsewhere in this prospectus. You should read the entire prospectus carefully, including the section entitled “Risk Factors”
before deciding to invest in our common stock. The terms “My Size,” the “Company,” “we,” “our”
or “us” in this prospectus refer to My Size, Inc. and its wholly-owned subsidiaries, unless the context suggests otherwise.
OUR BUSINESS
General Background and Description of the Company
My Size Inc. (the “Company”)
was incorporated and commenced operations in September 1999 as Topspin Medical, Inc., (“Topspin”), a private company
registered in the State of Delaware. Topspin was engaged, through 2012, in research and development of a medical magnetic resonance
imaging (“MRI”) technology for interventional cardiology and in the development of MRI technology for use in the diagnosis
and treatment of prostate cancer.
On September 1, 2005, the Company issued
securities to the public in Israel according to a prospectus and became publicly traded on the Tel Aviv Stock Exchange (“TASE”).
In 2007, and until August 2012, the Company registered some of its securities with the U.S. Securities and Exchange Commission
(“SEC”).
In January 2012, after having received
the approval at the general meeting of shareholders of the Company, the Company consummated a transaction whereby it acquired Metamorefix
Ltd. (“Metamorefix”). Pursuant to such transaction Metamorefix became wholly-owned by the Company. Metamorefix was
incorporated in 2007, and was engaged in the development of innovative solutions for the rehabilitation of tissues, particularly
skin tissues.
On August 21, 2012, the Company’s
board of directors (the “Board”), approved the suspension of the Company’s reporting obligations under Section
13(a) and 15(d) of the Securities Exchange Act of 1934 (the “De-Registration”). The Company thereafter filed a Form
15 with the SEC on September 5, 2012 to effect the De-Registration. Upon the filing of the Form 15, the Company’s obligation
to file periodic and current reports with the SEC, including Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current
Reports on form 8-K, was immediately suspended.
By the end of 2012, in view of the Company’s
cash flow, the Company ceased its above operations and shortly thereafter the Company’s employees were laid off. In January
2013 the Company sold its entire ownership interest in Metamorefix.
In December 2013, the Company changed its
name to Knowledgetree Ventures Inc. In January, 2014, the Board approved a transaction with Shoshana Zigdon, a related party, with
respect to a technology venture through a new subsidiary, as discussed in the Shoshana Zigdon Agreement below (see “February
2014 Purchase Agreement”). On February 16, 2014, the Company changed its name to My Size, Inc.
On July 25,
2016, the Company’s common stock began publicly trading on the NASDAQ Capital Market (“NASDAQ”) under the symbol
“MYSZ”
.
Transaction Involving Change in Control
In September 2013, Ronen Luzon, the Company’s
current Chief Executive Officer, purchased control of the Company from Mr. Asher Shmuelevitch (the “Transaction”). Mr.
Luzon purchased 1,755,950 shares of common stock from Mr. Shmuelevitch, which shares represented approximately 40% of the issued
and outstanding capital stock of the Company at such time, and thus Mr. Luzon became a controlling shareholder of the Company.
Within the framework of the Transaction,
Mr. Luzon reached a settlement with the Company’s creditors pursuant to which the main creditor, Mr. Asher Shmuelevitch, was paid
a total sum of New Israeli Shekel (“NIS”) 0.5 million, in consideration for a full and final waiver of any and all
his claims that he may have relating to any monetary indebtedness of the Company to the creditors.
As a result of the various investment
rounds in the Company, Mr. Luzon's beneficial ownership in the Company has been diluted and currently represent approximately
9.55% of the issued and outstanding shares of common stock of the Company on a fully diluted basis.
Business Overview
The Company is a technology company whose
strategy is based on the development of applications that can be utilized to accurately take measurements of a variety of items
via a smartphone. By downloading the application to a smartphone, the user is then able to run the smartphone over the surface
of an item the user wishes to measure. The information is then automatically sent to a cloud-based server where the dimensions
are calculated through the Company’s proprietary algorithms, and the accurate measurements (+ or - .78 of an inch) are then
sent back to the users smartphone. We believe that the commercial applications for this technology are significant in many areas.
Currently, we are focusing on the following
market segments:
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E-commerce apparel industry – our main target-market;
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Do it yourself (“DIY”) uses; and
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Usage as a tape measure.
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While we are currently devoting much of
our focus on the applications for the apparel business, management believes that all of the above mentioned applications will be
useful to users, retailers and vendors alike.
February 2014 Purchase Agreement
In February 2014, the Company entered into
a Purchase Agreement (the “Agreement’) with Shoshana Zigdon (“Seller”), with respect to the acquisition
of certain rights in a venture for the accumulation of physical data of human beings by portable electronic devices (including
smart phones, tablets and other portable 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 so accumulated (the “Venture”). Prior
to entering into the Agreement, in January 2014, the Agreement was approved by shareholders of the Company as the Seller was also
a beneficial owner of over 20% of the outstanding capital of the Company.
Pursuant to the Agreement, the Company
purchased the all of Seller’s rights, title and interest in and to the Venture, including, but not limited to, the method
(the “Method”) and the certain patent application that had been filed by Seller (PCT/IL2013/050056) (the “Patent”,
and collectively with the Method, the “Assets”).
In consideration for the sale of the Assets,
the Company agreed to pay to Seller, 18% of the Company’s operating profit, directly or indirectly connected with the Venture and/or
the Method and/or the commercialization of the Patent together with value-added tax (“VAT”) in accordance with the
law (the “Consideration”) for a period of 7 years from the end of the development period of the Venture. The parties
further agreed that Seller’s right to receive the Consideration will apply even in the event the Patent is revoked/rejected/expires
and/or the non-receipt of the Patent for any reason. Down payments on account of the Consideration are to be paid to the Seller
once quarterly, within 14 days from the approval of the reviewed financial reports of the Company, with the exception of the fourth
quarter which will be paid after the approval of the audited financial reports of the Company. Payment will be made against a duly
issued tax invoice as prescribed by law.
The Agreement may be terminated by either
party in the event of a breach of the obligations of the other party and the failure to cure a default within a specified period
of time. The Agreement further provides that Seller is entitled to repurchase the Assets from the Company upon the occurrence of
one or more of the following events: (a) if an application for liquidation of the Company and/or an application for appointment
of a receiver for the Company and/or for a significant part of its assets has been filed, and/or an attachment has been imposed
on a significant part of the Company’s assets, and the application or attachment – as the case may be – has not been
not canceled within 60 days from the date on which they are filed; or (b) if upon the date that is 7 years from the date of execution
of the Agreement, the amount of Company’s income, directly and/or indirectly accumulated from the Venture and/or the Method
and/or the commercialization of the Patent is less than NIS 3.6 million (“Repurchase Events”).
If any such Repurchase Event occurs, Seller
shall have a 90 day right, subject to delivery of written notice to the Company of Seller’s intention to exercise such right,
to repurchase the Assets from the Company. The repurchase price will be based upon a market price to be determined by an external
and independent valuer, who shall be chosen by agreement by the parties, and the Audit Committee shall conduct the negotiations
on behalf of the Company to determine the identity of the valuer. In the absence of agreement on the identity of the valuer, the
valuer shall be appointed by the President of the Institute of Certified Public Accountants in Israel. If one of the parties appeals
against the valuation, with the Company’s decision to appeal being made by the Audit Committee of the Company, the parties shall
approach another agreed valuer from one of the four large accounting firms in Israel (and in the absence of agreement he shall
be chosen by the President of the Institute of Certified Public Accountants) and an average shall be taken of the two valuations
which are received. The parties shall bear the valuers’ fees and all the expenses of the valuation in equal shares. Unless Seller
gives the Company written notice of the retraction of Seller’s intention to repurchase the Assets, the Seller shall be obligated
to repurchase the Assets within 60 days from the date of receipt of the valuation. Seller shall have the right to retract its intention
to repurchase the Assets, provided Seller gives written notice to the Company within 30 days of receiving the valuation and subject
to Seller refunding the Company the expenses borne by the Company in respect of the valuation (provided that the Company gives
Seller details of the expenses borne by it).
In addition to the foregoing, the Agreement
provides that all developments, improvements knowledge and know-how developed and/or accumulated by the Company after the execution
of the Agreement will be owned by the Company. Further, the Seller agreed not to compete, directly or indirectly, with the Company
in any matter relating to the Assets and/or the Venture and/or the Method for a period of 7 years from the end of the development
period of the Venture.
The Market - The Apparel Industry
The growth in online apparel shopping has
been both a blessing and a curse for retailers. The blessing: what was an approximately $63.3 billion apparel and accessories market
in 2016 is projected to increase to approximately $96.4 billion U.S. dollars by 2021 (https://www.statista.com/statistics/278890/us-apparel-and-accessories-retail-e-commerce-revenue).
The curse: while online apparel shopping is growing quickly, so too have customer returns due to a bad fit.
For apparel retailers, both in retail and
online, customer returns are a necessary pain point, backed by flexible return policies and in some instances, free return shipping.
However, online retailers have higher operating costs as at least 30% of all products ordered online are returned, compared
to 8.89% from retail stores, according to recent data (http://www.business2community.com/infographics/e-commerce-product-return-statistics-trends-infographic-01505394#Js0FFKfd6xZEorqz.97). The
U.S. Census Bureau estimated that total e-commerce sales for 2016 were $394.9 billion, an increase of 15.1% from 2015. According
to Euromonitor International, most online apparel retailers have average return rates of 15-20%, of which around 80% are fit-based.
According to the National Retail Federation, when translating these figures into hard currency, in the United States, online consumers
returned approximately $260 billion in merchandise to retailers in 2015, or 8% of all purchases.
MySizeID
We are currently in development of an application
(“MySizeID”) which assists the consumer to accurately take the measurements of his or her own body using a smartphone
in order to fit clothing in the best way possible without the need to try the clothes on. The purpose of our application is to
simplify the process of clothing acquisition through the internet and to significantly reduce the rate of returns of ill-fitting
clothing which are acquired through the internet.
The application is the result of a research
and development effort that combines:
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Anthropometric research – analyses of information pertaining to body measurements derived from a survey and the subsequent determination of correlations between body parts;
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Body measurement algorithm research - an algorithm created by the Company to measure body parts; and
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Retailers size chart analyses – adopting a deep understanding of the size charts of retailers and the corresponding “body to garment size”.
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MySizeID will operate based on the use
of existing sensors in smart phones which enable, through a specific purpose application, the measurement of the body of consumers
independently by moving the cellular phone along his or her body. The measurements will then be saved on the Company’s cloud database,
enabling the user to search for clothes in various retailer websites without worrying about size. When a search is made, the retailer
will connect to the Company’s cloud database and then provide results based on the user’s measurements and other parameters as
he or she may have defined. This data will also be saved for use when a customer enters a brick and mortar store to help serve
the customer more efficiently and to provide a better shopping experience.
As soon as the item is found and the acquisition
is completed, the retailer will be charged a certain percentage of the acquisition price. The rate to be charged by My Size for
the acquisition has not yet been fixed, and will be determined following negotiations with fashion companies, in a more advanced
stage of the development
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How MySizeID Can be Utilized by the
Apparel Industry
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MySizeID: This application will allow consumers to create a secure, online profile of their personal measurements, which can then be utilized with partnered online retailers to insure that no matter the manufacturer or size chart, they will get the right fit. The MySizeID application will utilize a patent-pending measurement technology that does not rely on user photographs or any additional hardware; all a user needs to do is scan their body with their smartphone and the app records their measurements.
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In Store Shopping Tool: Users of MySizeID can allow brick and mortar merchants to access their profile to receive more personalized attention. This concierge like service enables a salesperson to better serve customers by accessing the user’s size and style preferences to make the in-store shopping experience more pleasant, time efficient and satisfactory.
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Cross Site Search Feature: The MySizeID profile will enable users to search for a specific product or item across multiple online retailers, but, unlike most shopping comparison shopping tools, MySizeID will deliver results that fit each individual user’s measurements. This feature can be customized for personalized filters that go beyond sizing and measurements, and can also include a user’s favorite colors, brands, styles and more.
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The application is being designed to use
a person’s body measurements to help determine correct apparel sizes when shopping on-line. To begin, the app will measure
the hip breadth, and uses statistical, mathematical algorithms to recommend the most appropriate size trousers.
True Size
In November 2016, the Company introduced
a new product called TrueSize.
TrueSize is a customizable, white-label,
mobile application that empowers retailers to improve the online shopping experience of their customers by perfectly matching their
true measurements with the retailer’s offerings. The level of accuracy and ease of use integrated into the retailer’s website
ensures that the customers will select the right size apparel every time, and we believe this will significantly reduce the amount
of returns.
How Does TrueSize Work?
TrueSize has two components: a white label
application and a small application located on each page of the retailer’s website. First, the customer downloads the TrueSize
app, branded to a specific retailer’s website, and signs in, using the same credentials used for the online store. The application
will then guide the customer through the process.
Using the TrueSize app, the customer next
takes accurate measurements of an item of clothing from their wardrobe by placing the smartphone first on one end of the item and
then on the other end. The app. will then prompt the user to take several different measurements to get a complete reading. The
information pertaining to each item is then saved, but can be updated at any time. Measurements are next stored in the cloud and
a recommended size for the user is calculated. The user may continue shopping directly from the app by clicking the “Go Shopping”
button, which will direct them to the retailer’s mobile website.
The chart below illustrates how consumers
can interact with the prompts from the TrueSize application.
Shopping with TrueSize:
A “TrueSize” widget in the
form of a button is located in proximity to the size selection feature on each product page of the retailer’s website. If
the customer has signed in to the website and has already downloaded the TrueSize app and taken measurements, a recommended size
will automatically appear in the widget. Users then have the option to manually update their size parameters – height, weight,
and an item’s parameters – at any time by simply clicking on the widget. If the customer has not yet signed into the
website, a prompt will appear requesting the customer to do so.
TRUCCO – RealSize
RealSize
is a white label measurement application developed based on the Company’s TrueSize technology.
The first customer
to use the TrueSize technology is IN SITU S.A., the owner of the rights to the fashion brand-name TRUCCO.
TRUCCO
is a women’s clothing brand and has over 240 points of sale in more than 20 countries all over the world including, but not
limited to, Andorra, Chile, China, Costa Rica, Czech Republic, Dominican Republic, France, Guatemala, Israel, Kuwait, Libya, Malaysia,
Mexico, Panama, Paraguay, Peru, Portugal, Qatar, Russia, Singapore, Slovakia, Spain, Taiwan and Thailand.
The Market - Courier Services
When an individual wishes to ship boxes
from place to place, they often call a courier service and request a pick up. The individual is then usually asked about the dimensions
of the package to be shipped. Unfortunately, the response given to the courier can be rather vague (big, medium, small, etc.).
This is often the cause of much confusion between the shipper and the courier. This confusion can lead to the courier sending out
the wrong vehicle for the pick-up and/or a large price differential than what was originally quoted by the courier causing customer
dissatisfaction.
How My Size Can be Utilized for Courier
Services
My Size operates based on the use of existing
sensors in smart phones which enable, through a specific purpose application, measurement of the dimensions of packages by moving
the cellular phone along packages (length, height and width) to be sent via courier. The measurements are then be saved on the
Company’s cloud database and shared with the courier. This allows for:
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Courier services to provide accurate pricing to their consumers with little to no confusion; and
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Courier services can send the proper sized vehicle to pick up package(s).
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Accordingly to Market Realist, the courier
service market in the United States alone had revenues of over $90 billion in 2014. Accordingly, the Company views this as an excellent
opportunity to create value in the courier market.
Agreement with Katz Delivery Services,
LTD
On November 20, 2015, My Size entered into
an agreement (the “Katz Agreement”) with Katz Deliveries, LTD (“Katz”), one of the largest courier services
in Israel. Katz delivers approximately five million parcels per year, the most in Israel. Katz has more than 250 vehicles. Pursuant
to the Katz Agreement, the parties have agreed to mutually work together to develop and integrate My Size technology with the technology
of Katz to accurately monitor the volume of all parcels delivered to it for shipment by its clients. The goal is for Katz to use
our technology to help with planning its distribution lines, thus reducing operational costs by adjusting the distribution vehicles
to the volume of the shipments. My Size hopes to begin to see revenues from this endeavor by the second half of 2018, but is still
in negotiations with Katz regarding terms of payment.
SizeUp
My Size is working on additional consumer
applications. One of these applications is in the category of DIY. In this application, users will be able to visualize how an
object or a piece of furniture will fit in an existing room in their home or office. As many people have difficulty with spatial
recognition, the Company hopes this will help alleviate the problem.
In the third quarter of 2015, My Size launched
the SizeUp application, a smart tape measure for the business to consumer market. SizeUp is a project that My Size has already
completed and launched. This application allows users to utilize their smartphone as a tape measurer. The application provides
measurements with an accuracy plus or minus 2 centimeters. In the first quarter of 2016, a second version of SizeUp for the iOS
operating system was released. This release included the ability to measure both horizontal and vertical measurements. In January
2017, a third version of SizeUp for the iOS operating system was released. This release included an innovative air measurement
algorithm which allows the user to measure over the air without the need to slide the phone over the surface during the measurement.
Through August 2017, there have been over 200,000 downloads of the SizeUp app.
The first version of the SizeUp app for
Android was released in March 2016 and included vertical measurement. An update to the app was released in June, 2017 which update
includes a one-time calibration process for ensuring high accuracy. Currently both versions of the SizeUp app (for Android and
iOS) are available for free for the first 30 days, where after a user will be required to pay a onetime/monthly fee of $1.99 to
continue using the application.
Research and Development
The Company has incurred research and development
expenses of $727,000 in 2016 and $301,000 in 2015 relating to the development of its applications and technologies. Most of the
research and development expenses are for wages and for subcontractors. The Company expects to continue to incur these costs as
it continues to develop its products and technologies.
Income Sources - Projected Income
The Company’s business model currently
contemplates three methods of producing revenue through its products:
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Fees - The Company intends
to charge sellers a fee for every garment and clothing item purchased using its services, which fees are currently anticipated
to be in the range of 1% to 3% of royalties on product sales, depending on volume, resulting from usage of the MySizeID platform.
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Advertisements - the Company may generate revenue by using specialized ads using its database to identify the user’s exact needs.
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“Offline Shopping” - the Company may offer its services for clothing and fashion stores, for real-time use by their customers. The service may allow the store to immediately offer the customer a fitting garment suitable for his or her size.
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Competition
Management of the Company believes that
its technology and applications are a win-win solution for consumers, retailers, couriers and individuals. The Company’s technology
is protected by 4 patent-pending submissions, with a fifth patent application in process. My Size’s products are designed to allow
users to measure themselves simply by sliding a smartphone over their body, and the measurements are recorded by the My Size application.
Unlike other products claiming similar
capabilities, there is no need for additional accessories (no webcam, photos, measuring tape, etc.). Users of the My Size apps
will have their information protected and a unique id number is provided that matches personal sizes with retailer size charts.
When consumers get the right size products, there are fewer returns of such products involved.
My Size’s advantage lies in its easy to
use application in recording body measurements. Using special algorithmic equations, the software is able to determine which sizes
will best fit the customer. The collection of this data, and tracking shoppers’ preferences, allows for a unique shopping experience
both online and in brick and mortar stores where the technology can instantly match clothes the customer likes in sizes that will
fit them.
However, My Size does face competition
in helping retailers increase conversation rate and reduce shipping costs.
Competitive
Landscape
Name
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Technology
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User Action
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Product / Service
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True Fit
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Algorithm driven engine matches manufacturer specs and data points with customer profile
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Answer questions to create profile.
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True Fit recommendation engine
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Fits.me
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Software solution based on a personal avatar; Algorithm driven engine matches manufacturer specs and data points with customer profile
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Answer questions to create profile
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Virtual fitting room size
Recommendations
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Virtusize with
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Compares a reference item the silhouette of the garment they are looking to buy
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Reference items: a previous purchase or a favorite item
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Garment-to-garment comparison.
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Some of our competitors have significantly
greater financial, marketing, personnel and other resources than we do, and many of our competitors are well established in markets
in which we have existing retailers or intend to locate new retailers. We may also need to evolve our concepts in order to compete
with popular new retail formats or concepts that develop from time to time, and we cannot offer any assurance that we will be successful
in doing so or that modifications to our concepts will not reduce our profitability.
Employees and Independent Contractors
We currently have 12 employees and 7 independent
contractors.
RISK FACTORS
An
investment in our securities involves a high degree of risk. This prospectus contains a discussion of the risks applicable to an
investment in our securities. Prior to making a decision about investing in our securities, you should carefully consider the specific
factors discussed under the heading “Risk Factors” in this prospectus, together with all of the other information contained
or incorporated by reference in the prospectus supplement or appearing or incorporated by reference in this prospectus. You should
also consider the risks, uncertainties and assumptions discussed under Item 1A, “Risk Factors,” in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2016 and any updates described in our Quarterly Reports on Form 10-Q,
all of which are incorporated herein by reference, and may be amended, supplemented or superseded from time to time by other reports
we file with the SEC in the. The risks and uncertainties we have described are not the only ones we face. Additional risks and
uncertainties not presently known to us or that we currently deem immaterial may also affect our operations. The occurrence of
any of these known or unknown risks might cause you to lose all or part of your investment in the offered securities.
Risks Related to Our Company and
Our Business
We may never successfully develop any
products or generate revenues.
We are a pre-revenue stage company with
research, development, marketing and general and administrative expenses. We may be unable to successfully develop or market any
of our current or proposed products or technologies, those products or technologies may not generate any revenues, and any revenues
generated may not be sufficient for us to become profitable or thereafter maintain profitability. We have not generated any recurring
revenues to date.
We have historically incurred significant
losses and there can be no assurance when, or if, we will achieve or maintain profitability.
During the twelve months ended December
31, 2016, the Company realized a net loss of $4,334,000 compared with a net loss of $3,437,000 for the year ended December 31,
2015. Our net loss from continuing operations for the three months ended June 30, 2017 was $1,318,000. Because of the numerous
risks and uncertainties associated with the development of the Company’s products and business, we are unable to predict
the extent of any future losses or when we will become profitable, if at all. Expected future operating losses will have an adverse
effect on our cash resources, stockholders’ equity and working capital. Our failure to become and remain profitable could
depress the value of our stock and impair our ability to raise capital, expand our business, maintain our development efforts,
diversify our portfolio of staffing companies, or continue our operations. A decline in our value could also cause you to lose
all or part of your investment in our Company.
Based on the projected cash flows and the cash
balances as of the date of
t
his prospectus, our management is of the opinion that without further fund raising we will not
have sufficient resources to enable the Company to continue its operating activities, including the development and marketing of
our products, for a period of at least 12 months from the date of filing of
t
his prospectus. As a result, there is substantial
doubt about our ability to continue as a going concern.
Management’s plans include the continued
commercialization of our products and securing sufficient financing through the sale of additional equity securities, debt or capital
inflows from strategic partnerships. There can be no assurances, however, that we will be successful in obtaining the level of
financing needed for our operations. If we are unsuccessful in commercializing our products and securing sufficient financing,
we may need cease operations.
We will need to raise additional capital
to meet our business requirements in the future, which is likely to be challenging, could be highly dilutive and may cause the
market price of our common stock to decline.
In order to meet our business objectives,
we will need to raise additional capital, which may not be available on reasonable terms or at all. Additional capital would be
used to accomplish the following:
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finance our current operating expenses;
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pursue growth opportunities;
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hire and retain qualified management and key employees;
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respond to competitive pressures;
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comply with regulatory requirements; and
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maintain compliance with applicable laws.
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To the extent that we raise additional
capital through the sale of equity or convertible debt securities, the issuance of such securities could result in substantial
dilution for our current stockholders. The terms of any securities issued by us in future capital transactions may be more favorable
to new investors, and may include preferences, superior voting rights and the issuance of warrants or other derivative securities,
which may have a further dilutive effect on the holders of any of our securities then-outstanding. We may issue additional shares
of our common stock or securities convertible into or exchangeable or exercisable for our common stock in connection with hiring
or retaining personnel, option or warrant exercises, future acquisitions or future placements of our securities for capital-raising
or other business purposes. The issuance of additional securities, whether equity or debt, by us, or the possibility of such issuance,
may cause the market price of our common stock to decline and existing stockholders may not agree with our financing plans or the
terms of such financings.
In addition, we may incur substantial costs
in pursuing future capital financing, including investment banking fees, legal fees, accounting fees, securities law compliance
fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection
with certain securities we issue, such as convertible notes and warrants, which may adversely impact our financial condition.
Furthermore, any additional debt or equity
financing that we may need may not be available on terms favorable to us, or at all. If we are unable to obtain such additional
financing on a timely basis, we may have to curtail our development activities and growth plans and/or be forced to sell assets,
perhaps on unfavorable terms, which would have a material adverse effect on our business, financial condition and results of operations.
The success of our business is highly
dependent on being able to predict which applications and technologies will be successful, and on the market acceptance and timely
release of those applications and technologies. If we do not accurately predict which applications and technologies will be successful,
our financial performance will be materially adversely affected.
We expect to derive most of our revenue
by charging fees in connection with the usage of our applications and technologies. We must make product development decisions
and commit significant resources well in advance of the anticipated introduction of new applications and technologies. The release
of our applications and technologies may be delayed, may not succeed or may have a shorter life cycle than anticipated. If the
applications are not released when anticipated or do not attain wide market acceptance, our revenue growth may never materialize,
we may be unable to fully recover the resources we have committed, and our financial performance will be harmed.
We are substantially dependent on assets
we purchased from an affiliated party, and if we lose the rights to such assets or the assets are repurchased for any reason, our
ability to develop existing and new applications based upon these assets would be harmed, and our business, financial condition
and results of operations would be materially and adversely affected.
Our business is substantially dependent
upon assets that we acquired from Shoshana Zigdon. Pursuant to the Agreement, we acquired certain rights in a venture for the accumulation
of physical data of human beings by portable electronic devices (including smart phones, tablets and other portable 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 so accumulated. Under the Agreement, we acquired Seller’s rights, title and interest in and to the
Venture, including but not limited to, the Assets. Therefore, our ability to develop and commercialize our applications depends
upon the effectiveness and continuation of the Agreement. If we lose the right to the Assets, our ability to develop existing and
new drug applications would be harmed. The Agreement may be terminated by either party in the event of a breach of the obligations
of the other party and the failure to cure the default within a specified period of time. Further, Seller has the right to repurchase
the Assets from us upon the occurrence of one or more of Repurchase Events. If the Seller repurchases the Assets, our ability to
develop existing and new drug applications would be harmed.
Changes in economic conditions, including
continuing effects from the recent recession, could materially affect our business, financial condition and results of operations.
Because our customers are retailers, we,
together with the rest of the retail industry, depend upon consumer discretionary spending. The recent recession, coupled with
high unemployment rates, reduced home values, increases in home foreclosures, investment losses, personal bankruptcies and reduced
access to credit and reduced consumer confidence, has impacted consumers’ ability and willingness to spend discretionary
dollars. Economic conditions may remain volatile and may continue to repress consumer confidence and discretionary spending for
the near term.
Damage to our reputation or lack of
acceptance of our brand in existing and new markets could negatively impact our business, financial condition and results of operations.
We believe we are building a strong reputation
for the quality of our technology, and we must protect and grow the value of our brand to continue to be successful in the future.
Any incident that erodes consumer affinity for our brand could significantly reduce our brand value and damage our business. If
guests perceive or experience a reduction in quality, or in any way believe we failed to deliver a consistently positive experience,
our brand value could suffer and our business may be adversely affected.
In addition, our ability to successfully
develop new retailers in new markets may be adversely affected by a lack of awareness or acceptance of our brand in these new markets.
To the extent that we are unable to foster name recognition and affinity for our brand in new markets, our growth may be significantly
delayed or impaired.
As a result, adverse economic conditions
in any of these areas could have a material adverse effect on our overall results of operations. In recent years, certain of these
states have been more negatively impacted by the housing decline, high unemployment rates and the overall economic crisis than
other geographic areas. In addition, given our geographic concentration, negative publicity regarding any of our retailers in these
areas could have a material adverse effect on our business and operations, as could other regional occurrences such as local strikes,
terrorist attacks, increases in energy prices, adverse weather conditions, hurricanes, droughts or other natural or man-made disasters.
In particular, adverse weather conditions
can impact guest traffic at our retailers, and, in more severe cases, cause temporary retail closures, sometimes for prolonged
periods. Our business is subject to seasonal fluctuations, with retail sales typically higher during certain months, such as December.
Adverse weather conditions during our most favorable months or periods may exacerbate the effect of adverse weather on guest traffic
and may cause fluctuations in our operating results from quarter-to-quarter within a fiscal year.
Technology changes rapidly in our business,
and if we fail to anticipate new technologies, the quality, timeliness and competitiveness of our products will suffer.
Rapid technology changes require us to
anticipate which technologies and/or distribution platforms our products must take advantage of in order to make them competitive
in the market at the time they are released. Therefore, we usually start our product development with a range of technical development
goals that we hope to be able to achieve. We may not be able to achieve these goals, or our competition may be able to achieve
them more quickly than we can. In either case, our products may be technologically inferior to competitive products, or less appealing
to consumers, or both. If we cannot achieve our technology goals within the original development schedule of our products, then
we may delay products until these technology goals can be achieved, which may delay or reduce revenue and increase our development
expenses.
We rely upon third parties to provide
distribution for our applications, and disruption in these services could harm our business.
We currently utilize, and plan on continuing
to utilize over the current fiscal year, third party networking providers and distribution through companies including, but not
limited to, Apple and Google to distribute our technologies. If disruptions or capacity constraints occur, the Company may have
no means of replacing these services, on a timely basis or at all. This could cause a material adverse condition for our operations
and financial earnings.
We are dependent upon technology services,
and if we experience damage, service interruptions or failures in our computer and telecommunications systems, our customer relationships
and our ability to attract new customers may be adversely affected.
Our business could be interrupted by damage
to or disruption of our computer and software systems, and we may lose data. Our customers’ businesses may be adversely affected
by any system or equipment failure we experience. As a result of any of the foregoing, our relationships with our customers may
be impaired, we may lose customers, our ability to attract new customers may be adversely affected and we could be exposed to contractual
liability. Precautions in place to protect us from, or minimize the effect of, such events may not be adequate. If an interruption
by damage to or disruption of our computer and telecommunications equipment and software systems occurs, we could be liable and
the market perception of our services could be harmed.
We could be harmed by improper disclosure
or loss of sensitive or confidential company, employee, associate or customer data, including personal data.
In connection with the operation of our
business, we plan to store, process and transmit data, including personnel and payment information, about our employees, customers,
associates and candidates, a portion of which is confidential and/or personally sensitive. Unauthorized disclosure or loss of sensitive
or confidential data may occur through a variety of methods. These include, but are not limited to, systems failure, employee negligence,
fraud or misappropriation, or unauthorized access to or through our information systems, whether by our employees or third parties,
including a cyberattack by computer programmers, hackers, members of organized crime and/or state-sponsored organizations, who
may develop and deploy viruses, worms or other malicious software programs.
Such disclosure, loss or breach could harm
our reputation and subject us to government sanctions and liability under our contracts and laws that protect sensitive or personal
data and confidential information, resulting in increased costs or loss of revenues. It is possible that security controls over
sensitive or confidential data and other practices we and our third party vendors follow may not prevent the improper access to,
disclosure of, or loss of such information. The potential risk of security breaches and cyberattacks may increase as we introduce
new services and offerings, such as mobile technology. Further, data privacy is subject to frequently changing rules and regulations,
which sometimes conflict among the various jurisdictions in which we provide services. Any failure or perceived failure to successfully
manage the collection, use, disclosure, or security of personal information or other privacy related matters, or any failure to
comply with changing regulatory requirements in this area, could result in legal liability or impairment to our reputation in the
marketplace.
We might not be able to market our products.
We expend significant resources in our
marketing efforts, using a variety of media, including social media venues. We expect to continue to conduct brand awareness programs
and guest initiatives to attract and retain guests. These initiatives may not be successful, resulting in expenses incurred without
the benefit of higher revenues. Additionally, some of our competitors have greater financial resources, which enable them to purchase
significantly more advertising than we are able to purchase. Should our competitors increase spending on advertising and promotions
or our advertising funds decrease for any reason, or should our advertising and promotions be less effective than our competitors,
there could be a material adverse effect on our results of operations and financial condition.
Our business operations and future development
could be significantly disrupted if we lose key members of our management team.
The success of our business continues to
depend to a significant degree upon the continued contributions of our senior officers and key employees, both individually and
as a group. Our future performance will be substantially dependent in particular on our ability to retain and motivate our Chief
Executive Officer, and certain of our other senior executive officers. We currently do not have an employment agreement in place
with these officers. The loss of the services of our Chief Executive Officer, senior officers or other key employees could have
a material adverse effect on our business and plans for future development. We have no reason to believe that we will lose the
services of any of these individuals in the foreseeable future; however, we currently have no effective replacement for any of
these individuals due to their experience, reputation in the industry and special role in our operations. We also do not maintain
any key man life insurance policies for any of our employees.
Our growth may strain our infrastructure
and resources, which could slow our development of new retailers and adversely affect our ability to manage our existing retailers.
Our future growth may strain our retail
management systems and resources, financial controls and information systems. Those demands on our infrastructure and resources
may also adversely affect our ability to manage our existing retailers. If we fail to continue to improve our infrastructure or
to manage other factors necessary for us to meet our expansion objectives, our operating results could be materially and adversely
affected. Likewise, if sales decline, we may be unable to reduce our infrastructure quickly enough to prevent sales deleveraging,
which would adversely affect our profitability.
Retailers have been the target of class-actions
and other litigation alleging, among other things, violations of federal and state law.
Our customers are subject to a variety
of lawsuits, administrative proceedings and claims that arise in the ordinary course of our business. In recent years, a number
of retail companies have been subject to claims by guests, employees and others regarding issues such as safety, personal injury
and premises liability, employment-related claims, harassment, discrimination, disability and other operational issues common to
the retail industry. A number of these lawsuits have resulted in the payment of substantial damages by the defendants. Regardless
of whether any claims against us are valid or whether we are ultimately determined to be liable, we could also be adversely affected
by negative publicity, litigation costs resulting from the defense of these claims and the diversion of time and resources from
our operations.
Our insurance policies may not provide
adequate levels of coverage against all claims, and fluctuating insurance requirements and costs could negatively impact our profitability.
We believe our insurance coverage is customary
for businesses of our size and type. However, there are types of losses we may incur that cannot be insured against or that we
believe are not commercially reasonable to insure. These losses, if they occur, could have a material and adverse effect on our
business and results of operations. In addition, the cost of workers’ compensation insurance, general liability insurance
and directors’ and officers’ liability insurance fluctuates based on our historical trends, market conditions and availability.
Additionally, health insurance costs in general have risen significantly over the past few years and are expected to continue to
increase. These increases, as well as recently-enacted federal legislation requiring employers to provide specified levels of health
insurance to all employees, could have a negative impact on our profitability, and there can be no assurance that we will be able
to successfully offset the effect of such increases with plan modifications and cost control measures, additional operating efficiencies
or the pass-through of such increased costs to our guests.
We may not be able to adequately protect
our intellectual property, which, in turn, could harm the value of our brands and adversely affect our business.
Our ability to implement our business plan
successfully depends in part on our ability to further build brand recognition using our trademarks, service marks and other proprietary
intellectual property, including our names and logos and the unique ambiance of our retailers. We plan to register a number of
our trademarks. We cannot assure you that our trademark applications will be approved. Third parties may also oppose our trademark
applications, or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully challenged, we
could be forced to rebrand our goods and services, which could result in loss of brand recognition, and could require us to devote
resources to advertising and marketing new brands.
If our efforts to register, maintain and
protect our intellectual property are inadequate, or if any third party misappropriates, dilutes or infringes on our intellectual
property, the value of our brands may be harmed, which could have a material adverse effect on our business and might prevent our
brands from achieving or maintaining market acceptance. We may also face the risk of claims that we have infringed third parties’
intellectual property rights. If third parties claim that we infringe upon their intellectual property rights, our operating profits
could be adversely affected. Any claims of intellectual property infringement, even those without merit, could be expensive and
time consuming to defend, require us to rebrand our services, if feasible, divert management’s attention and resources or
require us to enter into royalty or licensing agreements in order to obtain the right to use a third party’s intellectual
property.
Any royalty or licensing agreements, if
required, may not be available to us on acceptable terms or at all. A successful claim of infringement against us could result
in our being required to pay significant damages, enter into costly license or royalty agreements, or stop the sale of certain
products or services, any of which could have a negative impact on our operating profits and harm our future prospects.
Information technology system failures
or breaches of our network security could interrupt our operations and adversely affect our business.
We will rely on our computer systems and
network infrastructure across our operations. Our operations depend upon our ability to protect our computer equipment and systems
against damage from physical theft, fire, power loss, telecommunications failure or other catastrophic events, as well as from
internal and external security breaches, viruses, worms and other disruptive problems. Any damage or failure of our computer systems
or network infrastructure that causes an interruption in our operations could have a material adverse effect on our business and
subject us to litigation or actions by regulatory authorities. Although we employ both internal resources and external consultants
to conduct auditing and testing for weaknesses in our systems, controls, firewalls and encryption and intend to maintain and upgrade
our security technology and operational procedures to prevent such damage, breaches or other disruptive problems, there can be
no assurance that these security measures will be successful.
We will incur increased costs and obligations
as a result of being a public company in the United States.
We will incur significant legal, accounting
and other expenses that we were not required to incur in the recent past. We expect these rules and regulations to increase our
legal and financial compliance costs and to make some activities more time consuming and costly. We estimate that we will incur
additional incremental costs per year associated with being a publicly-traded company; however, it is possible that our actual
incremental costs of being a publicly-traded company will be higher than we currently estimate. In estimating these costs, we took
into account expenses related to insurance, legal, accounting and compliance activities.
Furthermore, the need to establish the
corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy,
which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue
to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations
as a publicly traded company. However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded
company.
Our compliance with complicated regulations
concerning corporate governance and public disclosure has resulted in additional expenses. Moreover, our ability to comply with
all applicable laws, rules and regulations is uncertain given our management’s relative inexperience with operating public
companies.
We are faced with expensive, complicated
and evolving disclosure, governance and compliance laws, regulations and standards relating to corporate governance and public
disclosure. New or changing laws, regulations and standards are subject to varying interpretations in many cases due to their lack
of specificity, and their application in practice may evolve over time as new guidance is provided by regulatory and governing
bodies, which could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing compliance
work.
Our failure to comply with all laws, rules
and regulations applicable to U.S. public companies could subject us or our management to regulatory scrutiny or sanction, which
could harm our reputation and stock price. Our efforts to comply with evolving laws, regulations and standards are likely to continue
to result in increased general and administrative expenses and a diversion of management time and attention from revenue-generating
activities to compliance activities.
Federal, state and local or Israeli
tax rules may adversely impact our results of operations and financial position.
We are subject to federal, state and local
taxes in the U.S., as well as local taxes in Israel in respect to our operations in Israel. Although we believe our tax estimates
are reasonable, if the Internal Revenue Service (“IRS”) or other taxing authority disagrees with the positions we have
taken on our tax returns, we could face additional tax liability, including interest and penalties. If material, payment of such
additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial
position. In addition, complying with new tax rules, laws or regulations could impact our financial condition, and increases to
federal or state statutory tax rates and other changes in tax laws, rules or regulations may increase our effective tax rate. Any
increase in our effective tax rate could have a material impact on our financial results.
We may require additional capital to
finance our operations in the future, but that capital may not be available when it is needed and could be dilutive to existing
stockholders.
We may require additional capital for future
operations. We plan to finance anticipated ongoing expenses and capital requirements with funds generated from the following sources:
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cash provided by operating activities;
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available cash and cash investments; and
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capital raised through debt and equity offerings.
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Current conditions in the capital markets
are such that traditional sources of capital may not be available to us when needed or may be available only on unfavorable terms.
Our ability to raise additional capital, if needed, will depend on conditions in the capital markets, economic conditions and a
number of other factors, many of which are outside our control, and on our financial performance. Accordingly, we cannot assure
you that we will be able to successfully raise additional capital at all or on terms that are acceptable to us. If we cannot raise
additional capital when needed, it may have a material adverse effect on our liquidity, financial condition, results of operations
and prospects. Further, if we raise capital by issuing stock, the holdings of our existing stockholders will be diluted.
If we raise capital by issuing debt securities,
such debt securities would rank senior to our common stock upon our bankruptcy or liquidation. In addition, we may raise capital
by issuing equity securities that may be senior to our common stock for the purposes of dividend and liquidating distributions,
which may adversely affect the market price of our common stock. Finally, upon bankruptcy or liquidation, holders of our debt securities
and lenders with respect to other borrowings will receive a distribution of our available assets prior to the holders of our common
stock. Additional equity offerings may dilute the holdings of our existing stockholders or reduce the market price of our common
stock, or both.
Our business is dependent upon continued
market acceptance by consumers.
We are substantially dependent on continued
market acceptance of our products by customers, and such customers are dependent upon regulatory and legislative forces. We cannot
predict the future growth rate and size of this market. If we do not gain market acceptance of our applications, our business may
be materially affected.
If we are able to expand our operations,
we may be unable to successfully manage our future growth.
Since inception, we have been planning
for the expansion of our brand. Any such growth could place increased strain on our management, operational, financial and other
resources, and we will need to train, motivate, and manage employees, as well as attract management, sales, finance and accounting,
international, technical, and other professionals. In addition, we will need to expand the scope of our infrastructure and our
physical resources. Any failure to expand these areas and implement appropriate procedures and controls in an efficient manner
and at a pace consistent with our business objectives could have a material adverse effect on our business and results of operations.
Any future or current litigation could
have a material adverse impact on our results of operations, financial condition and liquidity.
From time to time we may be subject to
litigation, including potential stockholder derivative actions. Risks associated with legal liability are difficult to assess and
quantify, and their existence and magnitude can remain unknown for significant periods of time. To date we have obtained directors
and officers liability (“D&O”) insurance to cover some of the risk exposure for our directors and officers
.
Such insurance generally pays the expenses (including amounts paid to plaintiffs, fines, and expenses including attorneys’
fees) of officers and directors who are the subject of a lawsuit as a result of their service to the Company. There can be no assurance
that we will be able to continue to maintain this insurance at reasonable rates or at all, or in amounts adequate to cover such
expenses should such a lawsuit occur. While neither Delaware law nor our Amended and Restated Certificate of Incorporation (“Certificate
of Incorporation”) or Amended and Restated Bylaws (“Bylaws”) require us to indemnify or advance expenses to our
officers and directors involved in such a legal action, we expect that we would do so to the extent permitted by Delaware law.
Without D&O insurance, the amounts we would pay to indemnify our officers and directors should they be subject to legal action
based on their service to the Company could have a material adverse effect on our financial condition, results of operations and
liquidity.
Our prior operating results may not
be indicative of our future results.
You should not consider prior operating
results to be indicative of our future operating results. The timing and amount of future revenues will depend almost entirely
on our ability to engage new retailers while maintaining consistency in our existing retail. Our future operating results will
depend upon many other factors, including, but not limited to:
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the level of product and price competition;
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our success in expanding our business network and managing our growth;
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the ability to hire qualified employees; and
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the timing of such hiring and our ability to control costs.
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Our management controls a large block
of our common stock that will allow them to control us.
As of the date of this prospectus, members
of our management team beneficially own approximately 9.55% of our outstanding common stock. As such, management owns approximately
9.55% of our voting power. As a result, management may have the ability to control substantially all matters submitted to our
stockholders for approval including:
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election of our board of directors;
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removal of any of our directors;
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amendment of our Certificate of Incorporation or Bylaws; and
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adoption of measures that could delay or prevent a change in control or impede a merger, takeover
or other business combination involving us.
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In addition, management’s stock ownership
may discourage a potential acquirer from making a tender offer or otherwise attempting to obtain control of us, which in turn could
reduce our stock price or prevent our stockholders from realizing a premium over our stock price. Any additional investors will
own a minority percentage of our common stock and will have minority voting rights.
Risks Related to the Common Stock
A more active, liquid trading market
for our common stock may not develop, and the price of our common stock may fluctuate significantly.
Although our common stock is listed on
the NASDAQ Capital Market, it has only been traded on the NASDAQ Capital Market since July 25, 2016. There has been relatively
limited trading volume in the market for our common stock, and a more active, liquid public trading market may not develop or may
not be sustained. Limited liquidity in the trading market for our common stock may adversely affect a stockholder’s ability
to sell its shares of common stock at the time it wishes to sell them or at a price that it considers acceptable. If a more active,
liquid public trading market does not develop, we may be limited in our ability to raise capital by selling shares of common stock
and our ability to acquire other companies or assets by using shares of our common stock as consideration. In addition, if there
is a thin trading market or “float” for our stock, the market price for our common stock may fluctuate significantly
more than the stock market as a whole. Without a large float, our common stock would be less liquid than the stock of companies
with broader public ownership and, as a result, the trading prices of our common stock may be more volatile and it would be harder
for you to liquidate any investment in our common stock. Furthermore, the stock market is subject to significant price and volume
fluctuations, and the price of our common stock could fluctuate widely in response to several factors, including:
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our quarterly or annual operating results;
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changes in our earnings estimates;
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investment recommendations by securities analysts following our business or our industry;
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additions or departures of key personnel;
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changes in the business, earnings estimates or market perceptions of our competitors;
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our failure to achieve operating results consistent with securities analysts’ projections;
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changes in industry, general market or economic conditions; and
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announcements of legislative or regulatory changes.
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The stock market has experienced extreme
price and volume fluctuations in recent years that have significantly affected the quoted prices of the securities of many companies,
including companies in the staffing industry. The changes often appear to occur without regard to specific operating performance.
The price of our common stock could fluctuate based upon factors that have little or nothing to do with us and these fluctuations
could materially reduce our stock price.
Sales by our stockholders of a substantial
number of shares of our common stock in the public market could adversely affect the market price of our common stock.
A substantial portion of our total outstanding
shares of common stock may be sold into the market at any time. While most of these shares are held by our principal stockholder,
who is also an executive officer, and we believe that such holder has no current intention to sell a significant number of shares
of our stock, if he were to decide to sell large amounts of stock over a short period of time (presuming such sales were permitted,
given his affiliate status) such sales could cause the market price of our common stock to drop significantly, even if our business
is doing well.
Further, the market price of our common
stock could decline as a result of the perception that such sales could occur. These sales, or the possibility that these sales
may occur, also might make it more difficult for us to sell equity securities in the future at a time and price that we deem appropriate.
We are a smaller reporting company and,
as a result of the reduced disclosure and governance requirements applicable to such companies, our common stock may be less attractive
to investors.
We are a smaller reporting company, (i.e.
a company with less than $75 million of its voting equity held by affiliates) and we are eligible to take advantage of certain
exemptions from various reporting requirements applicable to other public companies. We have elected to adopt these reduced disclosure
requirements. We cannot predict if investors will find our common stock less attractive as a result of our taking advantage of
these exemptions. If some investors find our common stock less attractive as a result of our choices, there may be a less active
trading market for our common stock and our stock price may be more volatile.
We do not expect to pay any cash dividends
in the foreseeable future.
We intend to retain our future earnings,
if any, in order to reinvest in the development and growth of our business and, therefore, do not intend to pay dividends on our
common stock for the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board and will
depend on our financial condition, results of operations, capital requirements, and such other factors as our Board deems relevant.
Accordingly, you may need to sell your shares of our common stock to realize a return on your investment, and you may not be able
to sell your shares at or above the price you paid for them.
We can sell additional shares of common
stock without consulting stockholders and without offering shares to existing stockholders, which would result in dilution of stockholders’
interests in the Company and could depress our stock price.
Our Certificate of Incorporation authorizes
50,000,000 shares of common stock, of which 18,394,817 are currently outstanding, and our Board is authorized to issue additional
shares of our common stock. Although our Board intends to utilize its reasonable business judgment to fulfill its fiduciary obligations
to our then existing stockholders in connection with any future issuance of our capital stock, the future issuance of additional
shares of our common stock would cause immediate, and potentially substantial, dilution to our existing stockholders, which could
also have a material effect on the market value of the shares.
Further, our shares do not have preemptive
rights, which means we can sell shares of our common stock to other persons without offering purchasers in this offering the right
to purchase their proportionate share of such offered shares. Therefore, any additional sales of stock by us could dilute your
ownership interest in our Company.
Our quarterly operating results may
fluctuate significantly.
We expect our operating results to be subject
to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:
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variations in the level of expenses related to our development programs;
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any intellectual property infringement lawsuit in which we may become involved;
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regulatory developments affecting our products; and
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our execution of any collaborative, licensing or similar arrangements, and the timing of payments
under these arrangements.
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If our quarterly operating results fall
below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore,
any quarterly fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially.
If we fail to comply with the rules under
the Sarbanes-Oxley Act of 2002 related to accounting controls and procedures, or if we discover material weaknesses and deficiencies
in our internal control and accounting procedures, our stock price could decline significantly and raising capital could be more
difficult.
If we fail to comply with the rules under
the Sarbanes-Oxley Act of 2002 related to disclosure controls and procedures, or, if we discover material weaknesses and other
deficiencies in our internal control and accounting procedures, our stock price could decline significantly and raising capital
could be more difficult. Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness
of our internal control over financial reporting and a report by our independent auditors addressing these assessments. If material
weaknesses or significant deficiencies are discovered or if we otherwise fail to achieve and maintain the adequacy of our internal
control, we may not be able to ensure that we can conclude on an ongoing basis that we have effective internal controls over financial
reporting in accordance with Section 404 of the Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for
us to produce reliable financial reports and are important to helping prevent financial fraud. If we cannot provide reliable financial
reports or prevent fraud, our business and operating results could be harmed, investors could lose confidence in our reported financial
information, and the trading price of our common stock could drop significantly.
Our Certificate of Incorporation,
Bylaws and Delaware law may have anti-takeover effects that could discourage, delay or prevent a change in control, which may cause
our stock price to decline.
Our Certificate of Incorporation, Bylaws
and Delaware law could make it more difficult for a third party to acquire us, even if closing such a transaction would be beneficial
to our stockholders. Provisions of our Certificate of Incorporation, Bylaws and Delaware law also could have the effect of discouraging
potential acquisition proposals or making a tender offer or delaying or preventing a change in control, including changes a stockholder
might consider favorable. Such provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management.
In particular, the Certificate of Incorporation, Bylaws and Delaware law, as applicable, among other things:
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provide the Board with the ability to alter the Bylaws without stockholder approval;
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place limitations on the removal of directors; and
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provide that vacancies on the board of directors may be filled by a majority of directors in office,
although less than a quorum.
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We are subject to Section 203 of the
Delaware General Corporation Law which, subject to certain exceptions, prohibits “business combinations” between a
publicly-held Delaware corporation and an “interested stockholder,” which is generally defined as a stockholder who
becomes a beneficial owner of 15% or more of a Delaware corporation’s voting stock for a three-year period following the
date that such stockholder became an interested stockholder. These provisions are expected to discourage certain types of coercive
takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of us to first negotiate with
our Board. These provisions may delay or prevent someone from acquiring or merging with us, which may cause the market price of
our common stock and the value of our securities to decline.
If we fail
to comply with the continued minimum closing bid requirements of the NASDAQ Capital Market LLC (“NASDAQ”) or other
requirements for continued listing, our common stock may be delisted and the price of our common stock and our ability to access
the capital markets could be negatively impacted.
On September 26,
2017, we received a written notice (the “Notice”) from the NASDAQ Stock Market LLC (“NASDAQ”) that we were
not in compliance with NASDAQ Listing Rule 5550(a)(2), as the minimum bid price of our common stock has been below $1.00 per
share for 30 consecutive business days. The Notice had no immediate effect on the listing of our common stock, and our common stock
continues to trade on the NASDAQ Capital Market under the symbol “MYSZ”. In accordance with NASDAQ Listing Rule 5810(c)(3)(A),
we have a period of 180 calendar days, or until March 26, 2018, to regain compliance with the minimum bid price requirement.
To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for at least 10 consecutive
business days during this 180 calendar day period. In the event we do not regain compliance by March 26, 2018, we may be eligible
for an additional 180 calendar day grace period if we meet the continued listing standards, with the exception of bid price, for
the NASDAQ Capital Market, and we provide written notice to NASDAQ of our intention to cure the deficiency during the second compliance
period, by effecting a reverse stock split, if necessary. If we fail to regain compliance within the allotted compliance period(s),
including any extensions that may be granted by NASDAQ or fail to comply with or other requirements for continued listing, our
common stock may be delisted and the price of our common stock and our ability to access the capital markets could be negatively
impacted. A delisting of our common stock from The NASDAQ Capital Market could materially reduce the liquidity of our common stock
and result in a corresponding material reduction in the price of our common stock. In addition, delisting could harm our ability
to raise capital through alternative financing sources on terms acceptable to us, or at all, and may result in the potential loss
of confidence by investors, employees and fewer business development opportunities.