My Size, Inc. - Quarter Report: 2016 June (Form 10-Q)

U. S. Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2106

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

For the transition period from _________ to _________

Commission File No. 001-37370

MY SIZE, INC.

(Exact name of registrant as specified in its charter)

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

(Address of principal executive offices)

+972-3-600-9030

Registrant’s telephone number, including area code:

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 16,842,361 shares of common stock, par value $0.001 as of August 12, 2016.

MY SIZE, INC.

INDEX TO FORM 10-Q FILING

FOR THE THREE MONTHS ENDED JUNE 30, 2016

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

My Size Inc. and Subsidiaries

 
Condensed Interim Consolidated

Financial Statements

As of June 30, 2016

U.S. Dollars in Thousands  

My Size Inc.

Condensed Interim Consolidated Financial Statements as of June 30, 2016 (Unaudited)

Contents

My Size Inc.

Condensed Consolidated Balance Sheets

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

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

My Size Inc.

Condensed Consolidated Statements of Comprehensive Loss

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

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

My Size Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficiency) (Unaudited)

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

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

My Size Inc.

Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficiency) (Unaudited)

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

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

My Size Inc.

Condensed Interim Consolidated Statements of Cash Flows

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

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

Note 1 - General

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.

As of June 30, 2016 the Company had consolidated negative working capital of $789 and a negative cash flow from operating activities in the sum of $1,064 for the six months ended June 30, 2016. As of the date of the reports the Company entered into fund raising agreements in a total sum of $8,405 out of which the sum of $4,179 was received. Until the date on which the reports were signed an additional sum of $4,226 was received in cash, checks or guarantee by an ungraded financial institution and consequently, no additional balance is due.

For the purpose of meeting its obligations in the foreseeable future the Company relies on the exercise of the guarantees and on the exercise of the above mentioned documents.

Note 2 - Significant Accounting Policies

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.

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.

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.

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

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:

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.

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

Note 3 - Financial Instruments (cont’d)

Note 4 - Stock Based Compensation

Note 5 - Contingencies and Commitments

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

Note 5 - Contingencies and Commitments (cont’d)

On January 24, 2016, the Company filed a Statement of Defense on its behalf and a Request for Stay of Proceedings due to Lis Alibi Pendens (in view of the fact that at the same time the claim in the United States was still pending). In a decision dated February 15, 2016, it was held that a decision in the Company's Request for Stay of Proceedings would not be made at that stage and that the pre-trial proceedings would continue to take place. The fact that the claim in the United States was deleted (as described below), made the above Request redundant and it should have therefore been dismissed. On May 15, 2016, the plaintiff filed an Application to dismiss the above Request and the Company did not object said Application.

On May 10, 2016, the claim which was filed by the Company in the United States against the plaintiffs was deleted at the parties' consent without an order for costs.

In a pre-trial hearing dated March 7, 2016, the court decided that mutual disclosure of documents proceedings would take place and disclosure affidavits along with copies of the documents specified therein were exchanged between the parties.

Following the recommendation of the court, on March 20, 2016, the plaintiff filed a notice of deletion of certain defendants including board and management members excluding the chairman of the board and the general manager of the Company from the statement of claim.

On June 5, 2016, dates were scheduled for the filing of disclosure affidavits on behalf of the parties and an additional pre-trial hearing was scheduled for November 14, 2016.

The Company estimates, based on the opinion of its legal advisers that the chances 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, exceed the chances of its dismissal. In addition, at this stage of the proceedings, the Company's management estimates that the risk embedded in plaintiff's claim for a monetary remedy is insignificant.

Under the agreement, the investor were 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 thousand, which was granted to the Company on May 17, 2012, plus interest of 10% annually as from 20 May 2012 until payment of the debt, which as of the date of filing of the claim was NIS 258 thousand. The company denies the allegations stated in the request and is reviewing the possibilities, including the filing of reply to the court in accordance with law.

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 250 thousand NIS forthwith by wire transfer of about 95 thousand NIS and by the forfeiture of the sum of about 155 thousand NIS which had been deposited with the court. An additional amount of 50 thousand NIS 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 Mysize shares, pursuant to its terms, on a stock exchange in the United States, according to the earlier. As of the date on which the financial reports were signed the terms have not yet occurred.

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

Note 5 - Contingencies and Commitments (cont’d)

On November 6, 2015, the Company reported another letter of claim filed by it with the Tel-Aviv District Court. According to a decision dated March 22, 2016, affidavits of primary testimony were filed on behalf of the litigants and on July 18-19, 2016, evidentiary hearings were held in the above case.

A response letter was sent by the Company which stated that the Company did not consider itself as a party to the allegations which were raised in said letter and that in any event all such allegations were denied by it. The Company did not make an allowance in the reports in connection with said demand.

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 the cooperation.

The Agreement was approved by the general meeting on January 9, 2014.

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

Note 6 - Significant Events During the Reporting Period

On March 27, 2016, the Company announced that it has completed the initial development of the app on Android and iOS devices. The app has the ability to perform 3-D scan, photograph and obtain data on the time and location of the user. It should be clarified that this is not the final version of the application and that the Company and the shipping company continue to collaborate for further development and testing its integration

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 telephone 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.

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.

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.

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

Note 6 - Significant Events During the Reporting Period (cont’d)

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:

Under the agreement, LSY will pay the Company $100 in fees for establishment and implementation of technology systems as follows:

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 until the fulfillment of conditions for revenue recognition.

Until the date of the balance sheet, the Company received $200 dollars convertible into 57,161 shares of the Company, and 57,161 options were issued with respect thereto. The remaining balance of the loan was received after the date of the balance sheet, in July 2016 by way of a guarantee by an ungraded financial institution.

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

Note 6 - Significant Events During the Reporting Period (cont’d)

On the date of its receipt of the loan amounts, the allotment was attributed to three components:

The following table presents the data used to measure the fair value of the embedded derivative of the Company's shares according to the Black & Scholes model with respect to the above plan:

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

Note 6 - Significant Events During the Reporting Period (cont’d)

The company is engaged in exploration, development and operation of diamond project.

After the reporting date the Company received 4,400,000,000 shares of Inrob Tech Ltd. which is traded on OTC valued at 440 thousand dollars.

On the date of its receipt of the loan amountswere attributed to three components:

My Size Inc.

Notes to Condensed Consolidated Financial Statements

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

Note 6 - Significant Events During the Reporting Period (cont’d)

The following table presents the data used to measure the fair value of the embedded derivative of the Company's shares according to the Black & Scholes model with respect to the above plan:

Note 7 - Subsequent Events

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

You should read the following discussion along with our financial statements and the related notes included in this report. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions, including those discussed under “Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2015. Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forward-looking statements.

Results of Operations

Six and three months Ended June 30, 2016 Compared to Six and three months Ended June 30, 2015

Research and Development Expenses

Our research and development expenses for the six months ended June 30, 2016 amounted to $328,000 compared to $105,000 for the six months ended June 30, 2015. The increase primarily results from increased subcontractors expenses and new employees.

Our research and development expenses for the three months ended June 30, 2016 amounted to $151,000 compared to $69,000 for the three months ended June 30, 2015. The increase is mainly due to the explanation specified above. 

Marketing, General and Administrative Expenses

Our marketing, general and administrative expenses for the six months ended June 30, 2016 amounted to $925,000 compared to $764,000 for the six months ended June 30, 2015. The increase in expenses derives mainly from increases in the Company's operating activity partially offset by approximately $250,000 in expenses for options to consultants in 2015.

Our marketing, general and administrative expenses for the three months ended June 30, 2016 amounted to $599,000 compared to $458,000 for the three months ended June 30, 2015.The increase is mainly due to the explanation specified above.

Financial income and expense, net

Our financial expenses for the six months ended June 30, 2016 amounted to $2,143,000 compared to financial expense of $388,000 for the six months ended June 30, 2015. The increase in financial expenses derives mainly from the creation and revaluation of the components of the options and derivatives.

Our financial expenses for the three months ended June 30, 2016 amounted to $2,757,000 compared to financial expense of $366,000 for the three months ended June 30, 2015. The increase is mainly due to the explanation specified above.

Net Loss from continuing operations

As a result of the foregoing research and development, marketing general and administrative expenses, and financial expenses, our net loss from continuing operations for the six months ended June 30, 2016 was $3,396,000, compared to our net loss from continuing operations for the six months ended June 30, 2015 of $1,257,000. The main reason for the change is the increase in the Company's operating activity and the financial expenses mainly from the creation and revaluation of the components of the financial package.

Our net loss from continuing operations for the three months ended June 30, 2016 was $3,507,000, compared to our net loss from continuing operations for the three months ended June 30, 2015 of $893,000. The increase is mainly due to the explanation specified above.

Liquidity and Capital Resources

Since our inception, we have funded our operations primarily through private offerings of our equity securities in Israel.

As of June 30, 2016, we had cash and cash equivalents of $98,000 as compared to $919,000 as of December 31, 2015. The decrease in cash balances is due to cash used for operating activities during the period.

We had negative cash flow from operating activities of $1,064,000 for the six months ended June 30, 2016, compared with negative cash flow from operating activities of $597,000 for the six months ended June 30, 2015.

The increase in cash used in operating activities derives from larger payments to service providers and Company employees. The Company has expenses not in the ordinary course of business mainly from the registration of patents, the listing of our common stock on Nasdaq and legal expenses associated with lawsuits involving the Company. The Company's current monthly cash burn rate is about $154,000 per month.

We had negative cash flow from investing activities of $23,000 for the six months ended June 30, 2016, compared with negative cash flow from investing activities of $14,000 for the six months ended June 30, 2015. The negative cash flow resulted from purchase of equipment.

We had positive cash flow from financing activities of $279,000 for the six months ended June 30, 2016 as compared to $525,000 for the six months Ended June 30, 2015. The cash flow from financing activities for the six months ended June 30, 2016 and 2015 was mainly due to the issuance of a convertible loan and options.

As of June 30, 2016, the Company entered into fund raising agreements in a total sum of $8,405,000 out of which the sum of $4,179,000 was received. Since June 30, 2016, an additional sum of $4,226,000 was received in cash, checks or bank guarantees and consequently, no additional balance is due.

Application of Critical Accounting Policies and Estimates

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

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

Research and development expenses

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

Equity-based compensation

The Company accounts for stock-based compensation in accordance with ASC 718, "Compensation-Stock Compensation" ("ASC 718") which requires companies to estimate the fair value of equity-based payment awards on the date of grant using an option-pricing model. The value of the portion of the award that is ultimately expected to vest is recognized as an expense over the requisite service periods in the Company's consolidated statements of operations.

The Company recognizes compensation expenses for the value of its awards granted based on the accelerated method over the requisite service period of each of the awards, net of estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

The Company selected the Binomial option pricing model ("the Binomial model") as the most appropriate fair value method for its stock-options awards. The Binomial model requires a number of assumptions, of which the most significant are the suboptimal exercise factor and expected stock price volatility. The suboptimal exercise factor is estimated based on employees' historical option exercise behavior.

The suboptimal exercise factor is the ratio by which the stock price must increase over the exercise price before employees are expected to exercise their stock options.

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 expected option term represents the period that the Company's stock options are expected to be outstanding. The Company currently uses simplified method until sufficient historical exercise data will support using expected life assumptions. The risk-free interest rate is based on the yield from Israel treasury zero-coupon bonds with an equivalent term.

The Company has historically not paid dividends and has no foreseeable plans to pay dividends.

The Company applies ASC 505-50, "Equity-Based Payments to Non-Employees" with respect to options and warrants issued to non-employees.

If any of the assumptions used in the binomial model change significantly, equity-based compensation for future awards may differ materially compared with the awards granted previously.

Convertible promissory notes:

The Company applies ASC 470-20, "Debt with Conversion and Other Options" ("ASC 470-20"). Under the guidelines of ASC 470-20, the Company measures and recognizes the beneficial conversion feature on the commitment date. The beneficial conversion feature is measured by allocating a portion of the proceeds equal to the intrinsic value of the feature to additional paid-in-capital. The intrinsic value of the feature is calculated on the commitment date using the conversion price. This intrinsic value is limited to the portion of the proceeds allocated to the convertible debt.

The Company applied ASC 470-20 and ASC 815 to the Convertible promissory notes.

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

Not required for a smaller reporting company.

Item 4. Controls and Procedures.

Disclosure Controls and Procedures

We carried out an evaluation required by the Securities Exchange Act of 1934, as amended (the “Exchange Act”), under the supervision and with the participation of our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) of the 1934 Act, as of the end of the period covered by this report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports that we file or submit under the 1934 Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and to provide reasonable assurance that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based upon certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

Changes in Internal Controls

During the most recent fiscal quarter, there has not occurred any change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II – Other Information

Item 1. Legal Proceedings. 

Item 1A. Risk Factors.

Not required for a smaller reporting company.

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

On June 10, 2016, the Company was notified that its listing application on Nasdaq had been approved.. In connection therewith, in July 2016, the Company issued 1,528,687 shares of common stock in exchange for $5,350,000 of convertible loans, in accordance with a convertible loan agreement. 

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.  

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

SIGNATURES

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

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